SSR Mining (SSRM), which used to be called Silver Standard Resources, has been a stalwart of our portfolio since 1999, explains Brien Lundin, mining sector expert and editor of Gold Newsletter.
In the intervening years, the stock became one of our biggest winners, multiplying many times over and delivering tremendous leverage on rising silver prices, which is what it was originally designed to do.
However, the company has shifted gears in recent years, both changing its name to SSR Mining and focusing on becoming a mid-tier producer with more of a gold focus.
I’m updating the company now because, after a detailed review with management, I’m impressed with how well-run SSR is (they have a sterling record of increasing net asset value).
Perhaps most impressively, the company has somehow managed to achieve the best leverage to gold prices in their peer group while simultaneously maintaining rich operating margins. For a gold producer, SSR seems to offer the best of all worlds.
The company boasts three operating mines with at least eight years of mine life. In Q1 2018, its operations at Marigold in Nevada and Seebee in Saskatchewan along with its transitioning operation (Pirquitas) in Argentina, produced 78,483 gold-equivalent ounces and generated $11 million of operating cash flow.
The Pirquitas operation is part of the Puna Operations joint venture that SSR holds 75/25 with Golden Arrow resources. Puna is in the process of operationalizing the nearby Chinchillas silver-lead-zinc deposit.
The goal is for first ore production in the second half of 2018. That ore will be shipped 45 kilometers to the nearby milling operation at Pirquitas. Open pit mining at Pirquitas is largely winding down, though it did manage to generate 6.2 million ounces of silver in 2017 and 900,000 ounces of silver in Q1 2018.
This production has come largely through stockpile processing, which will continue through Q2 2018. A study on operating Pirquitas as an underground mine is currently underway.
Meanwhile, the Seebee Mine in Saskatchewan has proven itself a steady, underground gold producer. The mine generated 83,998 ounces of gold in 2017 at cash costs of $602/ounce. In Q1 2018, it generated 23,717 ounces of gold at cash costs of $481/ounce.
Seebee’s mineral reserves’ gold grade increased to 9.9 g/t on a year-over-year basis, making it one of the highest-grade underground mines in Canada. The company has been ramping up mill throughput at Seebee and achieved a record 1,036 tonnes per day of throughput in Q1
Given these facts, SSR is forecasting increasing production at lower costs in the next few years. Plus, exploration is underway at the nearby Fisher project — a joint venture with Taiga Gold.
SSR is also investigating the potential of the Santoy Gap Hanging Wall, Carr and CRJ targets. The goal is to prove up as much resource as possible from the inferred category to the measured and indicated categories.
Finally, the company’s flagship Marigold gold project is a large-scale, low-cost gold producer located along Nevada’s Battle Mountain-Eureka Trend. The mine produced 202,240 ounces of gold in 2017 at cash costs of just $647 an ounce.
SSR is pondering a couple of different scenarios for equipment replacement at Marigold in 2019. Depending on the scenario management chooses, annual gold production could jump to over 300,000 ounces per year in the long term. As it is, the company’s base case for Marigold calls for growth to 250,000 ounces of production
by 2022.
There’s plenty more to tell about SSR, but suffice it to say the company is well positioned for growth on all three of its core projects. Given this robust growth profile, and the wealth of share price catalysts I foresee in the coming months, SSR is a buy (with renewed enthusiasm) at current levels.
