Q3 2024 Andean Precious Metals Corp Earnings Call
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Speaker Change: Good morning and welcome to Andean Precious Metals third quarter 2024 results conference call.
Speaker Change: As a reminder, all participants are in listen-only mode and the conference is being recorded.
Speaker Change: After the presentation, there will 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 then zero.
Speaker Change: I would now like to turn the conference over to Amanda Mallough, Director, Investor Relations. Please go ahead.
Amanda Mallough: Thank you, Operator, and good morning, everyone. Before we get started, I would like to point out that during today's call, we may make forward-looking statements as defined under Canadian securities law. I ask that you view our slide presentation precautionary language regarding forward-looking statements and the risk factors pertaining to these statements.
Amanda Mallough: Our press release, MD&A, and financial statements are available on both CDAR Plus and our corporate website, AndeanPM.com.
Amanda Mallough: With us on today's webcast is Alberto Morales, Andean's Executive Chairman and CEO, Juan Carlos Sandoval, our Chief Financial Officer.
Amanda Mallough: Dom Kizek, our new Vice President, Finance and Corporate Controller, and Alex Pascual, our Director of Financial Planning and Analysis.
Speaker Change: Following management's formal remarks, we will open the call to questions. And now over to you, Alberto.
Thank you, Amanda, and welcome everyone.
Alberto Morales: We are pleased to report a solid quarter with strong financial performance.
for Q3 2024.
Alberto Morales: We've generated record consolidated revenue of 68.4 million, supported by an average realized gold price of $2,413 per ounce, and silver at $31.40 per ounce.
Alberto Morales: This revenue helped us close the quarter with a stronger financial position, including a record $98.1 million in cash, cash equivalents, marketable securities, and short-term investments.
Alberto Morales: Our ability to generate $17 million in free cash flow this quarter, despite additional capex expenditure.
was fostered by $23.4 million in operating cash flow.
Alberto Morales: Gross Profits came at $21.4 million, driven primarily by lower underlying cost of production.
Alberto Morales: On the production side, we deliver consolidated Q3 output of 29,284 gold equivalent ounces, which is equivalent to 2.3 million silver ounces.
Alberto Morales: Golden Queen produced 14,025 gold equivalent ounces while San Bartolome contributed with 1.2 million silver equivalent ounces supported by improved recovery.
We'll discuss production in greater detail later in the call.
Alberto Morales: But now, I'd like to reaffirm our 2024 production guideline, which we expect to achieve at the lower end.
Alberto Morales: We also anticipate a reduction in operating cash costs and oil in sustaining costs per cool down sold in Q4, thanks to increased production levers and lower CAPEX.
Alberto Morales: I'd also like to welcome Dominic Isaac to our management team as Vice President Finance and Corporate Controller.
Alberto Morales: Dominic is here with us on the call today and brings a wealth of experience from his time at New Gold, Viral North Gold, and Agnico Eagle.
Alberto Morales: Lastly, on health and safety, we recorded one lost time injury at San Bartolome in Q3, while Golden Queen achieved 403 consecutive days without a lost time injury.
reflecting our ongoing commitment to workplace safety.
Alberto Morales: We look forward to sharing further details on these results and answering your questions. With that, I will hand this over to Juan Carlos, who will walk through our financials in greater detail.
Juan Carlos: Thank you, Alberto. Good morning, everyone. As we turn to our financial performance this quarter, I'd like to emphasize the strength of our financial position and our continued focus on value generation.
Juan Carlos: Starting with production and revenue, we achieved consolidated Q3 production of 2.3 million silver equivalent ounces of 1.1 million ounces from Q3 2023.
Juan Carlos: The growth was largely driven by the inclusion of Golden Queen, which contributed 1.1 million silver equivalent ounces this quarter.
Juan Carlos: We close Q3 with revenue of $68.4 million, a 79% increase over Q3 2023.
Juan Carlos: And for the first nine months, for the nine months ended September 30th, consolidated revenue reached $181.2 million, a 137% increase year over year.
Juan Carlos: This impressive growth is a result of Golden Queen's contribution and higher silver prices at San Bartolome.
Speaker Change: As Alberto already mentioned, the company ended Q3 with a robust balance sheet, holding $98.1 million in cash, cash equivalents, marketable securities, and short-term investments.
Speaker Change: This balance sheet position enables us to fund our key initiatives while maintaining financial flexibility.
Speaker Change: On the cost side, total cost of sales rose to $41.6 million for the quarter, reflecting the additional production expenses associated with Golden Queen.
Speaker Change: However, at San Bartolomé, we saw lower Bolivian-Boliviano denominated operating expenses, helping us to partially offset the increase.
Speaker Change: Depreciation and depletion also rose to 5.3 million this quarter, driven by the inclusion of gold in Queens assets.
Speaker Change: General and administrative expenses were $6.3 million in Q3, with a portion of this increase also due to Golden Queen's acquisition and associated corporate costs.
Speaker Change: EBTA was $20.1 million and $48.1 million for the three months and nine months ended respectively.
Speaker Change: Adjusted EBTA was $19.2 million for the quarter, reflecting strong revenue growth from both Golden Queen and San Bartolome.
Speaker Change: For the nine months ended September 30th, Adjusted EBTA reached $43.9 million, showing the positive impact of lower operating costs and higher realized prices for both EBTA and Adjusted EBTA.
Speaker Change: Capital expenditures for this quarter total $15.9 million, supporting ongoing projects at Golden Queen and the FDF facility at San Bartolomé.
Speaker Change: On the topic of CapEx, we have increased our 2024 CapEx program and now anticipate total CapEx spend of $36 million.
Speaker Change: The increase is primarily driven by higher investments at our Golden Queen Mine, which we will discuss in more detail in a couple of slides.
Speaker Change: In summary, Q3 was another strong quarter financially, marked by record revenues, robust cash flows, and a healthy cash balance.
Speaker Change: These results position us well to pursue growth opportunities while maintaining financial stability.
Moving on to slide 8, Sambar Tolomes, Operating Financial Performance.
Speaker Change: In Q3, San Bartolomé purchased 220,000 tons of material, marking a 6% increase over the last year as we continue sourcing third-party oxide material to support our processing capacity.
Speaker Change: Total throughput was lower year over year at 0.3 million tons.
Speaker Change: primarily due to the plant cessation of her mining activities at Payacos.
Speaker Change: However, we maintain robust processing levels by bringing in materials from BACA and other local sources, ensuring steady output.
Silver equivalent production was 1.2 million ounces.
down slightly from last year due to changes in throughput.
Speaker Change: Revenue for Q3 was $35.4 million, a 7% decrease compared to last year, largely driven by lower sale volumes despite the favorable impact of higher average silver prices.
Speaker Change: At San Bartolomé, recoveries were 83% at Q3 versus 76% for the same period in 2023. We have had a steady increase in recoveries during 2024 due to the optimizing operation process.
Speaker Change: On the cost side, total cost of sales decreased significantly to $18.9 million, reflecting our improved cost controls and favorable foreign exchange.
Speaker Change: The cash gross operating margin per silver equivalent ounce sold saw a strong increase to $12.3 up from $2.5 last year.
Speaker Change: while gross margin ratio also improved to 46.6%, both metrics benefiting from higher silver prices and lower operating costs.
In terms of capital expenditures.
Speaker Change: Q3 spending was $1.4 million down from last year as we wrapped up work on our FDF project.
Speaker Change: This facility is expected to reach before end of Q4 of this year, deeper, higher grade sections and we've been steadily increasing mill throughput position as well for upcoming quarters.
Speaker Change: In summary, San Bartolomé is delivering steady performance with strengthened margins and disciplined cost management.
Speaker Change: We're optimistic about the continued benefits from our new operational focus and look forward to building on this foundation.
Moving on to Golden Queen.
Speaker Change: I'll provide an update on this operation, which we acquired in late 2023.
Speaker Change: While we don't have comparable Q3 data from last year, I'll share performance highlights from Q3 relative to Q2 of this year.
Speaker Change: Golden Queen produced 14,025 gold equivalent ounces, down from 16,986 ounces in Q2.
Speaker Change: This decline was largely due to the temporary suspension of our crosshair circuit, due to maintenance which extended beyond our planned schedule, as well as certain equipment upgrades.
Speaker Change: Unfortunately, we faced extended lead times for certain parts, which impacted ore stacking and leaching schedules.
Speaker Change: To address these challenges, we've implemented a comprehensive CAPEX and equipment overhaul program aiming to improve reliability in late 2024 and beyond.
Speaker Change: Revenue for the quarter was $33 million compared to $40 million in Q2.
Speaker Change: The lower revenue aligns with reduced production, as we saw 13,714 gold equivalent ounces at an average realized price of $2,474.
Speaker Change: On costs, total cost of sales decreased to $22.8 million from $25.2 million in Q2, with the reduction primarily attributable to lower production and inventory adjustments.
Speaker Change: However, due to the decrease in ounces sold, operating cash cost per ounce rose to $1,557 from $1,350 in Q2.
Speaker Change: All in sustaining cost and all in cost per ounce. We're also higher this quarter at $2,300 and $2,928 respectively.
Speaker Change: reflecting the impact of production delays and our commitment to upgrade our fleet, which included adding six new haul trucks and refurbishing existing equipment, as well as additional exploration intended to increase the life of mine.
Speaker Change: Looking ahead, we expect the ongoing CAPEX investment to strengthen gold in Queens production capacity and operational stability, driving down costs, and enhancing reliability in the quarters to come.
with respect to our guidance.
Speaker Change: As we review our updated guidance for 2024, I want to highlight that despite some operational challenges,
We are reaffirming our full year production guidance.
Speaker Change: We expect production to land at the low end of our previously announced ranges.
Speaker Change: Specifically, for gold and queen, we're targeting 60,000 ounces gold equivalent, 5 plus minus 5 percent.
Speaker Change: For San Bartolome, our target remains at 5 million silver equivalent ounces plus minus 5 percent.
Speaker Change: On a consolidated basis, that brings us to an estimated 115,000 gold-equivalent ounces or 10.4 million silver-equivalent ounces for the year, plus minus 5%.
Turning to our cost guidance, we've made a few adjustments.
Speaker Change: At San Bartolome, we've been able to sustain lower operating expenses, and as a result, we're now forecasting a cash gross operating margin of $7 per silver equivalent ounce, with a gross margin ratio of 30%.
Speaker Change: These revised figures reflect the cost efficiencies we have achieved throughout the year.
Speaker Change: For Golden Queen, we're adjusting our all-in-sustaining cost guidance to $19.50 per ounce.
Speaker Change: This increase is largely due to the significant capital expenditures we've invested in equipment overhauls and replacements.
Speaker Change: and exploration aimed at ensuring greater operational reliability and longer life of mine moving forward.
Speaker Change: On the CAPEX guidance, as mentioned earlier, we have increased our total 2024 target spent for both sustaining and growth CAPEX to $36 million.
Speaker Change: The primary increases are for new growth capex at Golden Queen, including new haul trucks and loaders.
Speaker Change: as well as additional explorations which we anticipate to increase our overall throughput and future production and a longer life of mine.
Speaker Change: This update reflects our disciplined approach in meeting production targets while also positioning our operations for long-term stability and growth.
Speaker Change: With these steps, we're setting the stage for improved cost management into 2025 and beyond.
Speaker Change: Now, I'll turn the call back to Alberto for final remarks.
Hello.
Thank you, Juan Carlos.
Speaker Change: Looking back over the past year, it's remarkable to see how far we've come.
In September 2023, we were a single asset, single company.
with a single product.
Speaker Change: Without production concentrated in a higher risk jurisdiction in a limited life of mine of around two years.
Speaker Change: We generated $76 million in revenue over the first nine months of 2023. And while we were profitable, we recognized that in order to truly thrive,
Speaker Change: We needed to grow and diversify our portfolio in a way that minimized risk and maximized value for the shareholders.
Fast forward to today, and thanks to a transformative acquisition.
Speaker Change: We are now a multi-asset, multi-product company operating across two jurisdictions, including the United States.
Speaker Change: This has not only diversified our asset base, but also expanded our production capacity significantly.
Speaker Change: In the first nine months of 2024, we generated $181 million in revenue and nearly tripled our EBITDA, reaching $28.1 million.
Speaker Change: We now have a stronger cash position, and even after our significant growth investment, our balance sheet remains strong.
Most importantly,
Speaker Change: We've extended our production outlook to over six years, providing a much more stable foundation for the future.
Speaker Change: Looking ahead to 2025, we're committed to continuing this momentum. Our objective is to once again double the size of our company while maintaining a strong cash balance.
We will do this by focusing on responsible growth.
Speaker Change: Discipline Financial Management and Operational Excellence, always with a focus on delivering value to our shareholders.
Speaker Change: I am excited about the journey we're on, and we thank you for your continued support.
Speaker Change: We look forward to sharing more updates on our progress in the coming quarters.
Speaker Change: With that, I will hand back the call over to the operator for Q&A.
Thank you.
Speaker Change: To join the question queue, you may press star, then one on your telephone keypad. You'll hear a tone acknowledging your request. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two.
Speaker Change: Our first question is from Justin Chan with SCP Resource Finance. Please go ahead.
and Mark Zuckerberg. Thank you. Thank you. Thank you.
Speaker Change: Alberto, Juan Carlos, Amanda, congratulations on a good quarter. It's good to speak to you guys again. My first one is just on CAPEX. I saw that you had
In the MD&A summary,
Speaker Change: You know, you quoted a number of close to $16 million for CapEx, but just looking at the cash flow statement for the first three months, I think it was about $15.1 million total for the first three months, and from that I calculated $6.5 million cash for CapEx just based on the cash flow statement.
Speaker Change: So that was quite a big difference between, you know, $16 million for Q3 and $6.5 million.
Speaker Change: wondering if I'm missing something or if most of that 16 million was accrued or yeah just how to model that from yeah just you know the difference and then where to put it in the model
Speaker Change: I'm happy to run the numbers with you, but I think the difference is, for example, on the whole truck fleet, they were acquired through a vendor's financing.
Speaker Change: So I think that's where the difference comes. So I'm happy to walk through your calculations, but you have to take into account that some of that cap was done through the vendors financing.
Speaker Change: Understood. So I guess from a cash perspective, CapEx has changed. But yeah, just noting that, you know, cash CapEx has been $15 million up to now this year.
Speaker Change: Roughly, what are you expecting for the full year? How much of that CapEx in your guidance is cash versus non-cash?
Out of the total 36 million that we have announced,
Speaker Change: The whole truck fleet is being financed, the two loaders are being financed as well. So out of the $36 million, I would say $25 million will be in cash, Justin.
Justin Chan: Okay, so 25 are cash and the others are, I guess, accrued on the balance sheet as leases or something like that? That's correct, yes, it'll be reflected as a liable, yes.
Okay, thanks. That's very helpful.
Speaker Change: My second one's on San Bartolome and that was clearly a much improved quarter.
Speaker Change: there. I was wondering a couple of questions. One is on the margin increase. Was that purely down to, you mentioned efficiencies. I guess how much of that was efficiencies and how much of that was maybe timing of all purchases versus.
Speaker Change: versus subsequent price movements because silver was up quite significantly over the period. And then, yeah, maybe answer that. And then I just had a question on guidance, given that guidance is for $7, I think year-to-date you're at $8 margins now. So just wondering in Q4, does that, you know.
Speaker Change: I guess that would imply quite a lower margin than it was in Q3.
Speaker Change: Yes. Hi, Justin. This is Alberto. You know, that is a good question. What we're trying to be on the guidance is we've seen volatility on the silver prices. We're just trying to be conservative.
Speaker Change: You know that we will always steer towards the biggest possible margins as we can get, but the volatility has been there.
increase we have increased recoveries
Speaker Change: in San Bartolome significantly, we're looking for Q4 to actually be in similar ranges as the one in Q3 with respect to recovery, which is a significant uplift from last year's and the initial quarters of this year.
Speaker Change: So, it is a combination of lower operating costs that we're trying to achieve locally as well, and as well as increasing efficiencies and primarily focus on trying to enhance recoveries as much as possible.
Speaker Change: Understood, Alberto. So if I look at that margin, I think year-to-date your margin is now $8.
Speaker Change: And that was, you know, mostly because Q3 was, you know, $14.6 per ounce.
So, you know, your guidance is
Your guidance is $7, so if nothing changes.
Speaker Change: It sounds like you'll be well above that seven number, but it's just sort of a conservative guidance for volatility, is that right? It's just that we were trying to be conservative on volatility, especially what we've seen just in the last...
Eight weeks. Two weeks, if I may say.
Speaker Change: Understood. Okay thanks and then maybe one more and I'll free up the line.
Speaker Change: Just on the FDF, what are your current thoughts on timing there for, you know, will we see meaningful amounts of tons come through in Q4 and how great are you expecting?
Speaker Change: Yes, let me just say about the FDF, as you know, when we started the project on the FDA, we were still mining the Payacos, which is the lowest grade section of it.
Speaker Change: while continuing mining the Payacos until about a year ago when we were having Q3 call that we announced the suspension of the operations as per our agreement with Comigo.
We had accumulated a significant amount of lower-grade
Speaker Change: We began processing that, and we have now expanded this to go to deeper areas.
Speaker Change: And we're expecting that the FDF will be providing now reaching the higher grade areas within the 50s grams range per ton.
that would basically be increasing.
Absolutely.
Speaker Change: ounces arising from the FDF which at current prices should bear a good margin as well.
Um...
Speaker Change: Okay, thanks. Thanks very much, guys. I'll free up the line for other people. Thanks very much.
You're welcome, Justin.
Speaker Change: Once again, if you have a question, please press star then 1.
Speaker Change: This concludes the question and answer session. I'd like to turn the conference back over to Alberto Morales for any closing remarks.
Alberto Morales: Thank you, operator. Thank you all for joining us today and for your continued support. We remain committed to driving our business forward and look forward to sharing our progress in the quarters ahead.
Speaker Change: This brings to a close today's conference call. You may disconnect your lines.
Thank you for participating and have a pleasant day.