Q4 2023 SilverCrest Metals Inc Earnings Call
Operator: Good morning, ladies and gentlemen, and welcome to Silvercrest Reports' 2023 Annual Financial Report. At this time, all lines are now in silence. Following the presentation, we will conduct a question and answer session. If at any time during this call you need assistance, please press star zero for assistance.
Good morning.
Gentlemen, and welcome to Silvercrest reports 2023 annual financial results.
At this time all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session.
At any time during this call you need assistance. Please press star zero for the operator.
Operator: This call is being recorded on Monday, March 11, 2024. I would now like to turn the call over to Eric Pierre, please.
This call is being recorded on Monday March 11, 2024, I would now like to turn the call over to Erik <unk> CEO. Please go ahead.
Eric Pierre: Thank you, operator. Good morning, and thanks everyone for joining us. Today we'll be providing commentary on Q4 and full year 2023 results, after which we'll be happy to take questions. The slide deck we'll be referring to is available on the website at silvercrestmetals.com under the investor tab, although these results took a bit longer to get filed than we planned. We are extremely proud of what we've accomplished in 2023, and thank you for your patience in making this announcement. Before we get started, I'd like to direct you to the forward-looking statement on slide two. All figures discussed this morning are in U.S. dollars unless otherwise stated. All of the ounce and per ounce references discussed will be based on silver equivalent ounces sold unless otherwise specified. Our silver equivalent references are based on a gold to silver ratio of 79.51 to 1.
Thank you operator, good morning, and thanks, everyone for joining.
Today.
We'll be providing commentary on Q4 and full year 2023 results after which we'll be happy to take questions.
Slide deck will be referring to is available on the website at silvercrest metals dot com under the Investor tab.
While these results took a bit longer to get filed and we planned we are extremely proud of what we've accomplished during 2023 and thank you for your patience and making this announcement.
Before we get started I'd like to direct you to the forward looking statement on slide two all figures discussed. This morning are in U S dollars and less otherwise stated.
All of the elements and per ounce references discussed will be based on silver equivalent ounces sold.
Unless otherwise specified.
Our silver equivalent and references are based on gold to silver ratio of $79 five one to one.
Eric Pierre: On the call with me today is Chris Ritchie, President, and Cliff Lepore, Vice President, Operations. Starting on slide three, 2023 was our first full year of commercial production, and a successful one at that. We exceeded 2023 sales guidance with 10.25 million ounces sold and beat the lower end of cost guidance with all sustaining costs averaging $12.58 per ounce. Our strong operating margins of 61% provided flexibility to allow more than $87 million of capital to be allocated in 2023 while still ending the year with one of the best balance sheets in the silver space. In the first half of 2023, we repaid the remaining $50 million of debt, ending the year debt-free with $105.2 million in Treasury assets, which included $86 million in cash and $19.2 million in bullion.
On the call with me today is Chris Ritchie, President and Cliff <unk> Vice President operations.
Starting on slide three 2023 was our first full year of commercial production and a successful wanted that we exceeded 2023 sales guidance with 10, two 5 million ounces sold and beat the lower end of cost guidance with all sustaining cost averaging.
$12 58 per ounce.
Our strong operating margins of 61% provided flexibility to allow more than <unk>.
The $87 million of capital to be allocated in 2023, while still ending the year one of the best balance sheets in the silver space.
In the first half of 2023, we repaid the remaining $50 million of debt ending the year debt free with 100 point $105 2 million in treasury assets, which included.
$86 million in cash and $19 2 million in bullion.
Eric Pierre: In total, $37.2 million was invested in exploration, share buybacks, and bullion purchases. These are all areas of business that we believe drive further value for our shareholders. In 2023, we released our inaugural ESG report and made significant progress in our local communities to improve water access and reliability. These efforts allowed for a second planting season, which helped support increased income for our local community partners.
In total $37 2 million was invested in exploration share buybacks and Boeing and purchases.
These are all areas of business that we believe drive further value for our shareholders.
In 2023, when we released our inaugural ESG report and made significant process in our local communities to improve water access and reliability. These efforts allowed for a second planting season, which helped support the increase in content for the local our local community par.
<unk>.
Eric Pierre: We were recognized for our continued efforts and contributions by receiving a number of ESG distinctions in Mexico. I will now pass the call to Chris to discuss financial results for both the fourth quarter and the year. Thank you, Eric.
We were recognized for our continued efforts and contributions by receiving a number of ESG distinctions in Mexico.
I will now pass the call to Chris to discuss financial results for both the fourth quarter and the year.
Thank you Eric moving to slide four <unk> performed well throughout the fourth quarter with gold sales of 16100 ounces and silver sales of $1 two 8 million ounces.
Chris Ritchie: Moving to slide four, Los Chispas performed well throughout the fourth quarter with gold sales of 16,100 ounces and silver sales of 1.28 million ounces. Silver equivalent sales totaled 2.6 million ounces, bringing the year-to-date sales to 10.25 million ounces, exceeding the top end of our annual guidance. In the quarter, we generated revenue of $61.3 million, and our cost of sales was $24.4 million.
Silver equivalent sales totaled $2 6 million ounces, bringing the year to date sales to $10 $2 5 million ounces exceeding the top end of our annual guidance.
In the quarter, we generated revenue of $61 $3 million and our cost of sales was $24 4 million.
Chris Ritchie: In 2023, revenue was $245.1 million, and cost of sales was $96.8 million, for an impressive average annual operating margin of 61%. As costs tend to move with the metal price, this margin is a significant differentiator amongst our peers. Net earnings in the quarter were $35.9 million, or $0.25 per share. Total net earnings for the year were $116.7 million, or $0.79 per share. Free cash flow in the quarter was $24.1 million, or $0.16 per share.
2023 revenue was $245 1 million and cost of sales was $96 8 million.
For an impressive average annual operating margin of 61%.
As costs tend to move with the metal price. This margin is a significant differentiator amongst our peers.
Net earnings in the quarter was $35 9 million or <unk> 25 per share.
Total net earnings for the year was $116 7 million.
Or <unk> 79 per share.
Free cash flow in the quarter was $24 1 million or <unk> 16 per share.
Chris Ritchie: Annual free cash flow totaled $121.1 million, or $0.82 a share. Sustaining capital spent in the quarter was $12 million for a total of $37.1 million spent in 2023, consistent with the 2023 Technical Report Projection. Now on slide 5. Treasury assets increased by 29%, or $23.5 million in the quarter, with cash and cash equivalents growing by $16 million, and our bullion position increasing by $7.5 million.
Annual free cash flow totaled $121 1 million.
Or <unk> 82, a share.
Sustaining capital spend in the quarter was $12 million for a total of $37 1 million spent in 2023 consistent with the 2023 technical report projections.
Now on slide five.
Treasury assets increased by 29% or $23 5 million in the quarter with cash and cash equivalents growing by $16 million and our bullion position increasing by seven 5 million.
Chris Ritchie: During 2023, our Treasury assets increased by $54.4 million, or 107%, to $105.2 million. Our bullion holdings outperformed all other currencies on our balance sheet in 2024, and we are proud to be providing increased exposure to bullion for our shareholders while fighting to make a better return on our invested capital. To enter 2024 with this financial strength after only our first year of commercial production is a unique accomplishment that we believe is a differentiator in the industry and something that provides resilience, flexibility, and the ability to make prudent choices when allocating capital. For the past three years, our stock has had a healthy relationship with the gold and silver price. We strive to increase the sensitivity of our stock to the metal price while reducing the risk for our shareholders. Our balance sheet strength and the choice to hold bullion on our balance sheet are ways we believe we are reducing risk while giving investors more exposure to their currency of choice.
During 2023, our treasury assets increased by $54 4 million.
Or 107% to $105 2 million.
Our bullion holdings outperformed all other currencies on our balance sheet in 2024, and we are proud to be providing increased exposure to bullion for our shareholders, while fighting to make a better return on our invested capital.
To enter 2024 with this financial strength after only our first year of commercial production is a unique accomplishment that we believe is a differentiator in the industry and it's something that provides resilience flexibility and the ability to make prudent choices when allocating capital.
Over the past three years, our stock has had a healthy relationship with the gold and silver price.
We strive to increase the sensitivity our stock has to the metal price, while reducing the risk for our shareholders.
Our balance sheet strength and the choice to hold bullion on our balance sheet. Our ways. We believe we are reducing risk, while giving investors more exposure to their currency of choice.
Chris Ritchie: It is important to note that we do expect our pace of cash build to slow in 2024 due to a number of factors. Our cash flow in 2022 and 2023 benefited from tax-loss carry-forwards and will slow somewhat in 2024 as we pay accrued income taxes and duties from 2023. These payments will be made in Q1 2024, when we also begin to pay regular quarterly income tax installments. In H1 2024, we will also be making payments to our new and outgoing contractors, which will impact our cash flow. This includes an advance of $7.5 million for equipment purchase, which will save us $1.5 million in interest costs over the life of the contract.
It is important to note that we do expect our pace of cash build to slow in 2024 due to a number of factors our cash flow in 2022, and 2023 benefited from tax loss carryforwards and will slow somewhat in 2024 as we pay accrued income.
Taxes and duties from 2023.
These payments will be made in Q1 2024, when we also begin to pay regular quarterly income tax installments.
In <unk> 2024, we will also be making payments to our new and outgoing contractors, which will impact our cash flow.
This includes an advance of seven $5 million for equipment purchase, which will save us $1 5 million and interest costs over the life of the contract.
Chris Ritchie: We have worked hard to create this financial strength, and we are happy to be in a position to make better long-term decisions that benefit our shareholders. With that, I will now pass it on to Cliff to discuss operations at Los Chistos. Thanks, Chris. I'm now on slide six.
We have worked hard to create this financial strength and we are happy to be in a position to make better long term decisions that benefit our shareholders.
With that I will now pass it on to clip to discuss operations at last year's business.
Thanks, Chris I'm now on slide six.
Cliff Lepore: Underground mining rates in the corridor were 855 tons per day and averaged 824 tons per day in 2023. This is in line with ramp-up estimates of 800 to 900 tons per day. The Los Chispas plant averaged 1,136 tons per day in the quarter, a slight decline from quarter three due to unplanned downtime.
Underground mining rates in the quarter were 855 tonnes per day and averaged 824 tons per day in 2023.
This is in line with ramp up estimates of 800 to 900 tonnes per day.
The last piece of this plant averaged 136 tonnes per day in the quarter, a slight decline from quarter three due to unplanned downtime.
Cliff Lepore: In our quarter 4 production release in January, we noted that we would have more plant downtime in Q1 2024 for planned maintenance, with no anticipated impact to sales in the quarter. We're happy to announce that this work was completed in February and the plant has returned to design operating parameters earlier than predicted. Processed gold and silver grades averaged 771 silver equivalent grams per ton in 2023. The plant recovered 2.5 million ounces in Q4, totaling 10.4 million ounces in 2023. Metallurgical recoveries in Q4 remained high at approximately 98% for both metals.
And our quarter for production release in January we noted that we would have more plant downtime in Q1 2024 for planned maintenance with no anticipated impact of sales in the quarter were happy to announce that this work was completed in February and the plant has returned to design operating parameters earlier than predicted.
Process gold and silver grades averaged 771 silver equivalent grams per ton in 2023.
Recovered $2 5 million ounces in quarter, four totaling $10 4 million ounces in 2023.
<unk> metallurgical recoveries in Q4 remained high at approximately 98% for both metals.
Cliff Lepore: Corporate ASIC in the quarter of $14.36 was in line with their H2 2023 guidance but increased from quarter three. ASIC increased due to higher capital spend and payments to our outgoing mining contractor. Average ASIC for 2023 was $12.58, which beat the low end of the 2023 guidance range of $12.75 to $13.75.
Corporate ASIC in the quarter of $14 36.
Was in line with their age to 2023 guidance, but increased from quarter three.
Basic increased due to higher capital spend and payments to our outgoing mining contractor average ASIC for 2023 was $12 58.
Which beat the low end of the 2023 guidance range of $12 75 to $13 75.
Cliff Lepore: As announced on January 23rd, contract negotiations with underground mining contractors took place throughout 2023 and were finalized subsequent to year end. The selected contractor, Dumas, has begun mobilization at Las Chispas, and this is going to continue through Q3 2024. We view the change of contractor as a major de-risking decision, strategically aligning ourselves in a partnership focused on safety, predictability, and cost.
As announced on January 23rd contract negotiations with underground mining contractors took place throughout 2023.
And were finalized subsequent to year end.
The selected contractor Dumas has begun mobilization at Las <unk> and this is going to continue through Q3 2024, we view the change of contractor is a major derisking decision strategically aligning ourselves in a partnership focused on safety predictability and costs.
Cliff Lepore: I was just at the site, and I'm pleased to report that the transition is going well and we're excited for Dumas to be fully mobilized to begin ramping up mining rates in H2 2024, with a targeted exit rate of 1,050 tons per day. I will now pass it back to Eric to conclude the presentation. Thanks, Cliff. Moving on to slide 7.
I was just at site and I'm pleased to report that the transition is going well and we're excited for doing this to be fully mobilized to begin ramping up mining rates in <unk> 2024, with a targeted exit rate of 1050 tonnes per day.
I will now pass it back to Erik to conclude the presentation.
Thanks, Cliff moving on to slide seven our confidence in our 2023 technical report as confirmed by our 2024 guidance.
Eric Pierre: Our confidence in our 2023 technical report is confirmed by our 2024 guidance. For 2024, we have guided for a stable sales profile of 9.8 to 10.2 million ounces. We expect sales to be relatively consistent quarterly.
And in 2024, we have guided for a stable sales profile of nine 8% to $10 2 million ounces.
We expect sales to be relatively consistent quarterly corp.
Eric Pierre: Corporate all-in sustaining cost is expected to be between $15.00 and $15.90 per ounce, which aligns with our 2023 technical report estimate despite continued industry cost pressure. Corporate all-in sustaining cost in H1-2024 is expected to be higher than Q4-2023, in part due to contractor changes, and will reduce in the second half of 2024. Our expected sustaining capital spend of $40 to $44 million benefited from recent improvements in the mine plan, which increased efficiency and decreased forecasted spend.
Corporate all in sustaining cost is expected to be between $15 and $15 90 per ounce, which aligns with our 2023 Technical report estimate despite continued industry cost pressures.
Corporate all in sustaining cost in H, one 2024 is expected to be higher than Q4 2023.
In part due to contractor change and will reduce in the second half of 2024 are expected sustaining capital spend of $40 million to $44 million benefited from recent improvements in the mine plan, which increased efficiency and decreased forecasted spend.
Operator: A 12 to 14 million dollar exploration budget in 2024 will focus on reserve replacement, leveraging existing infrastructure by aiming to convert inferred resources in the first half of the year to indicated resources, and then moving on to new target generation in the second half. After a few years of supporting the transition to production, our exploration team is looking forward to strategically approaching exploration with a focus on outlining sustainable resources and reserve growth. That wraps up our formal commentary for today. Operator, please open the line for questions. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press the star followed by the number on your screen. You will hear a three-tone prompt to acknowledge, Slip the handset.
Sure.
A $12 million to $14 million exploration budget in 2024 will focus on reserve replacement leveraging existing infrastructure by aiming to convert inferred resources in the first half of the year.
<unk> indicated resources and then moving on to new target generation in the second half.
After a few years supporting the transition to production our exploration team is looking forward to strategically approaching exploration with a focus on outlining sustainable resources and reserve growth that.
That wraps up our formal commentary for today operator, please open the line for questions.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the one on your Touchtone phone you will hear with Vitol, perhaps acknowledging a request. If you are using a speaker phone. Please lift the handset before pressing any case.
One moment. Please for your first question.
Operator: Ladies and gentlemen, as a reminder, if you have any questions... Star 1, First question comes from Elaine Chartrand, an investor. Go ahead. Yes, good morning. I wanted to know if Silvercrest is now looking at investing in or acquiring another mining silver company. Yeah, this is Eric.
Ladies and gentlemen, as a reminder, if you have any questions. Please press star one now.
First question comes from Chartwell.
<unk> an investor. Please go ahead.
Yes, good morning, I wanted to know.
Chris is now looking at.
We are investing or acquiring other mining silver company.
Okay.
Yes. This is Eric.
Eric Pierre: We are working on an M&A program, so there is a board mandate to look at other producers in our space, preferably silver producers. We'll see how that goes for this year. Okay, I have another question. What is the income tax rate in Mexico?
We are working on M&A.
And M&A program.
So there is a board mandate to look at other producers.
In our space preferably silver producers.
Well, we will see how that goes for this year.
Yeah.
Okay I have another question.
What is the income tax rate.
And in Mexico.
Chris Ritchie: And as the rates go up... And the silver price goes over $30. Hi there, it's Chris here. The rate in Mexico is about 35%, including duties. The tax rate itself doesn't change with the metal prices.
And as the rate go up.
And the silver price goes over $30.
Hi, there its Chris here the rate in Mexico is about 35% including duties.
The tax rate itself doesn't change with the metal price.
Okay.
Operator: Thank you. Thank you. The next question comes from Travis Anderson at Gildergren University. Good morning, gentlemen. Quick question on the Mexican election coming up. I haven't been following it that closely, but I just was wondering if there are any changes expected from either party. I know it looks like the, um, M.O.'s chosen person is likely to succeed, but I was wondering if you know of any specific plans or, you know, platforms by either one that might affect you significantly. Yeah, the leading party right now is AMLO, the Morena party, so...um, lots of rhetoric, as you know, Travis, that goes around in Mexico, and a lot of that doesn't come to fruition. So we'll just sit back and wait and see. The ammo party will probably be taking the same agenda as over door, maybe with some twists, but it's really too early to say. Another quick question.
Thank you.
Thank you. Your next question comes from Charlie Anderson at Gilder Gagnon Howe. Please go ahead.
Good morning, gentlemen.
Quick question, just on the Mexican election coming up.
I haven't been following that closely but I just was wondering if there were any change.
<unk> is expected from either party.
I know it looks like the.
The.
Almost.
Hmm.
Chosen person is likely to succeed.
Wondering if you know of any specific plans are.
Platform, but either one might affect us significantly.
Yes, the leading party right now zambello, the marine up already so.
Lots of rhetoric.
As you know Travis that goes around in Mexico.
And a lot of that doesn't come to fruition. So, we'll just sit back and wait and see.
The ammo party.
We will probably be taking the same agenda is overdoor, maybe with some twists, but it's really too early to say.
And then another quick question the Boeing on you're carrying on your balance sheet is that carried at cost.
Operator: The bullion you're carrying on your balance sheet, is that carried at cost or at market price at the time you mined it or refined it? How do you account for that? Hey Travis, it's Chris.
Market prices at the time you.
You're reminded or refined it.
How do you account for that.
Hey, Travis its Chris.
Chris Ritchie: We carry the bullion at the market price. So, I mean, when we added our bullion, I think the average price was around 18 and a half million dollars. And since then, we've seen an appreciation, as discussed, the bullion itself was our best performing currency on the balance sheet for 2023. And obviously, this year, it's off to a good start. So, you know, for everybody to know, we also do covered calls on that to generate revenue. But when we see the volatility pick up, we've also taken some feedback from investors to push out the exercise price on those options in order to give the investors more exposure to the metal.
Kerry the bullion at market price.
I mean, we added our bullion I think the average price was around $18 5 million and since then we've seen an appreciation as discussed the <unk> itself was our best performing currency on the balance sheet for 2023, and obviously this year. It's it's off to a good start so for everybody to note.
We also do a covered calls on that did generate revenue.
But when we see the volatility pick up we've also taken some feedback from investors to to push out the exercise price on those options in order to give the investors more exposure to the metal.
Operator: Okay, great, thanks. Thank you. There are no further questions at this time. Apologies. Another question coming in from Paul Stanley. Yes, I've been a long-term investor in Silvercrest. Can you tell me approximately how many shares were repurchased in calendar year 2023, and I assume that you're planning to repurchase additional shares in 2024. Is that correct? Hi Paul, it's Chris.
Okay.
Right. Thanks.
Thank you there are no further questions at this time.
Another question coming in from Paul Stanley and Investor. Please go ahead.
Yes.
Been a long time investor in Silvercrest can you tell me.
Approximately how many shares were repurchased in calendar year 2023.
I assume that Youre planning to repurchase additional shares in 2024.
Is that correct.
Hi, Paul its Chris in 2023, we purchased approximately one 5 million shares and the Canadian price was in the neighborhood of $6 50.
Chris Ritchie: In 2023, we purchased approximately one and a half million shares, and the Canadian price was in the neighborhood of $6.50. We do have a budget for an NCIV this year, but the main way in which we use it is more to be opportunistic. We are in a cyclical business, and if there are moments of weakness, those are the main areas where we want to be aggressive.
So we do have a budget for an NCI view this year the main way in which we use it is more to be opportunistic we are in a cyclical business and if there are moments of weakness those are the main areas.
Where we want to be aggressive.
Operator: Okay, okay, Thank you very much. Thank you at this time, no further questions you may have. Thank you everyone for attending the Silvercrest Metals Q4 and full year 2023 results. Have a great day. Ladies and gentlemen, this concludes your conference for today. We thank you for participating, and we ask that you please...
Okay. Okay.
Okay. Thank you very much.
Thank you.
Thank you at this time no further questions you May proceed.
Thank you everyone for attending the Silvercrest metals Q4, and full year 2023 results.
Paul.
Have a great day.
Ladies and gentlemen. This concludes your conference for today, we thank you for participating and we ask that you. Please disconnect your lines.
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