Image source: The Motley Fool.
SSR Mining Inc. (SSRM -0.95%)
Q4Â 2019 Earnings Call
Feb 21, 2020, 11:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Thank you for standing by. This is the conference operator. Welcome to SSR Mining's Fourth Quarter and Year-End 2019 Conference Call. [Operator Instructions] I would now like to turn the conference over to Michael McDonald, Director of Investor Relations. Please go ahead.
Michael McDonald -- Director of Investor Relations
Thank you, operator. Good morning, ladies and gentlemen. Welcome to SSR Mining's Fourth Quarter and Year-End 2019 Conference Call, during which we will provide an update on our business and a review of our financial performance. Our financial statements and management's discussion and analysis have been filed on SEDAR and EDGAR and are also available on our website. To accompany our call, there is an online webcast and you will find the information to access the webcast in our news release relating to this call.
Please note that all figures discussed during the call are in U.S. dollars unless otherwise indicated. All references to cash costs and all-in sustaining costs are per payable ounce of metal sold. We will be making forward-looking statements today, so please read the cautionary note in the accompanying presentation.
Joining us on the call this morning are Paul Benson, President and CEO; Greg Martin, our CFO; Kevin O'Kane COO; and Carl Edmunds, Vice President, Exploration. Also present is John DeCooman, Senior Vice President, Business Development and Strategy.
Now, I would like to turn the call over to Paul for opening remarks.
Paul Benson -- President and Chief Executive Officer
Thank you, Michael. Good morning, ladies and gentlemen, and welcome to our call to discuss our operating and financial results for the fourth quarter and full year 2019. Pleasingly, it was another successful year for us as we continue to deliver on our strategy of creating value for our shareholders. As we start 2020, we have strong operations each providing solid production metrics, robust margins, good mine lives and exploration upside.
In 2019, our continued focus on operational excellence resulted not only in our 8th consecutive year of achieving production and cost guidance, it was also our best year as an operating company in terms of our safety performance. The strength of our portfolio and performance is reflected in our cash balance where we ended the year with over $0.5 billion in cash.
Each of our mines exceeded the top end of production guidance and they also set new production records. Both Marigold and Seabee are well positioned to continue growing gold production. And if they achieve the midpoint of 2020 guidance, they will each set new production records.
At Puna Operations, the mine successfully ramped up to steady state after declaring commercial production in late 2018. Puna finished the year on a very strong note with silver production of 2.1 million ounces at an all-in sustaining cost of $11.18 per ounce in the fourth quarter, demonstrating robust margins at today's silver price. Importantly, all three operations have significant mine lives and we are continuing to invest in the upside potential we see.
Yesterday, we released our 2019 reserve and resource report which, once again, highlighted the exploration success of both Marigold and Seabee and built on our track record of mineral reserve and resource growth. At Marigold, mineral reserves increased by 18% to 3.9 million ounces at a slightly higher head grade of 0.49 grams a tonne. In any year, that would be an impressive result, but it's all the more so when you consider this year Marigold should produce 4 million pounds in its 31st year of continuous operation. A real reminder, if one is needed, of what a truly great mine it is.
At Seabee, we increased measured and indicated mineral resources by 23% to 1.1 million ounces with an additional 583,000 ounces of inferred mineral resources, an increase of 21%. This year, our focus will turn to converting these ounces into reserves.
On the M&A side, we completed the acquisition of both Trenton Canyon and Buffalo Valley from Newmont. This acquisition brings our land holding in and around Marigold to almost 3 times what it was when we bought the mine in 2014. Trenton Canyon provides both oxide exploration potential as a supplement to Marigold and high-grade sulphide exploration potential at depth [Phonetic].
We also completed the acquisition of the remaining 25% interest in Puna, we didn't own. 2019 also marked the release of our inaugural sustainability report. The report was an excellent collective effort from all our mine sites and corporate office. We look forward to the release of our second annual report to be published later this year as we continue to inform the public about all the initiatives we implement across our portfolio and in the communities in which we operate.
In summary, 2019 was another successful year for SSR Mining and I'd like to thank our employees for delivering these great results that have positioned us for a year of strong operating cash flow in 2020.
With that, I'll turn the call over to Kevin, who will discuss our operational performance in more detail.
Kevin O'Kane -- Senior Vice President and Chief Operating Officer
Thank you, Paul. We finished 2019 with strong operating results for Q4 and for the year. Our safety performance during the last quarter was very good and the recordable incident rate for 2019 was the lowest in our history as an operating company. Operationally 2019 was a successful year across all three sites.
We achieved overall production and cost guidance for the 8th consecutive year. In total, we produced 421,800 consolidated gold equivalent ounces, including 106,200 gold equivalent ounces produced in the fourth quarter.
Cash costs for Q4 were $716 per gold equivalent ounce while cash costs for the year were $740 per gold equivalent ounce. Each operation exceeded the top end of production guidance for the year. We set yearly production records at all three sites. This was driven by higher grade at Seabee and strong operating performance at Marigold. Puna operations have stabilized, as we had previously indicated would occur, with significantly improved mill throughput and metal recoveries in the quarter.
At Marigold, we produced 59,200 ounces of gold in Q4, 12% more than in Q3, mainly due to stacking of higher grade ore in the third quarter that released from the pad during Q4. For 2019, the Marigold mine produced 220,200 ounces of gold, surpassing the upper end of our production guidance. This compares to 205,200 ounces of gold produced in 2018.
Production in 2019 benefited from higher grades and ore stacking in the fourth quarter of 2018. Cash costs for Q4 of 2019 were $778 per ounce, 5% lower than in Q3 2019. And cash costs for 2019 were $811 per ounce. During Q4, approximately 6.7 million tonnes of ore were delivered to the heap leach pads at a gold grade of 0.36 grams per tonne. This compares to 6.4 million tonnes of ore delivered to the leach pads at a gold grade of 0.51 grams per tonne in the third quarter.
Gold grade mined in the fourth quarter was 29% lower than the third quarter due to planned mining of lower grade material in the Mackay Pit. Strip ratio declined to 1.7-to-1 in the quarter, a 12% reduction compared to the previous quarter. During the quarter, 18.5 million tonnes of material were mined, down 3% from the third quarter, due mainly to planned maintenance of one hydraulic shovels and longer haulage cycles associated with the increased ore stacked.
The mine took delivery of a replacement hydraulic shovel at the end of 2019 and commissioning will be completed during Q1, 2020. The new leach pad cell was commissioned on schedule and on budget with ore stacking and leaching commencing in the fourth quarter of 2019. Material mined during the year totaled 74 million tonnes, a 5% increase as compared to 2018. Marigold stacked 25.7 million tonnes of ore in the leach pads during 2019.
Moving on to Seabee, the mine produced 22,100 ounces of gold in the fourth quarter of 2019, a 32% decrease compared to the third quarter due to the lower mill feed grades aligned with the reserve grade, more than offsetting higher milling rates. Cash costs were $505 per ounce compared to $373 per ounce in Q3 2019, higher due mainly to lower production from the lower feed grade.
During the fourth quarter, 87,400 tonnes of ore were milled at an average grade -- gold grade of 7.9 grams per tonne and recovery of 97.9%. This compares to 77,500 tonnes of ore milled at an average gold grade of 12.4 grams per tonne and recovery of 98.8% in the third quarter of 2019.
Plant throughput reached 1,057 tonnes per day in December as we started to see the benefits of the OE projects implemented during the year in the mine. Seabee produced 112,100 ounces of gold in 2019, an annual production record from higher gold grades, improved recoveries resulting from improvement projects and drawdown of in-process inventories.
The production in 2019 was 17% higher than in 2018. A total of 104,900 ounces of gold were sold during the year. The annual cash cost of $464 per ounce was a record low under SSR Mining ownership. In 2019, the operation milled 344,000 tonnes of ore, a 2% decrease compared to 2018. During the year, average gold mill feed grade was 9.56 grams per tonne, 4% [Phonetic] higher compared to the average gold grade milled in 2018.
As previously reported, we are expanding the capacity of our tailing storage facilities to accommodate the expected increase in mine life. We completed a 100% of the 2019 scope for the tailings expansion project during the first half of Q4 2019. The project remains on time and on budget. Preparation for the annual ice road at Seabee are well under way and transport of materials has commenced.
Puna operations produced 2.1 million ounces of silver during the fourth quarter, 28% higher than the third quarter of 2019, mainly due to the higher mill throughput, which averaged 4,348 tonnes per day for the quarter. The increase in plant throughput reflects improvement projects implemented during Q2 and Q3. Silver sales totaled 2.6 million ounces.
Cash costs were $8.90 per ounce for the fourth quarter compared to $14.22 per ounce of silver in the third quarter, mainly due to the higher silver production and by-product credits. In 2019, Puna operations produced a total of 7.7 million ounces of silver, 24 million pounds of lead, and 8.4 million pounds of zinc.
Silver sold equalled production for the year. After declaring commercial production at Chinchillas in December 2018, 2019 represents the first full year of Puna operations milling Chinchillas' open-pit ore. During 2019, ore was milled at an average of 3,800 tonnes per day. Ore milled contained an average silver grade of 184 grams per tonne. The average silver recovery was 93.2% higher than was projected in the project's PFS and a 29% improvement as compared to 2018, when the operation processed primarily low-grade stockpiled ore.
In summary, the operations, again, delivered solid safety performance and production results during the quarter and we achieved a record for full year gold equivalent production at all three sites.
I will now hand over to Carl, who will take you through our exploration activities.
Carl Edmunds -- Vice President of Exploration
Thank you, Kevin. The objectives of our 2019 exploration activities varied by-site, depending on where we saw the most opportunity to add value. As a reminder, we had a prolonged effort to convert the remaining portion of Red Dot Resources to reserves at Marigold. As the year developed, we added exploration lands at the south end of the property. In contrast to Marigold, at Seabee, our focus was on adding underground resources at Gap Hanging Wall proximal to the existing underground infrastructure.
We also continued the exploration of Greenfields concepts close to our mines. Our 2019 exploration activities successfully expanded corporate mineral reserves over and above mine depletion for the year. At Marigold, we converted the remaining Mineral Resources at Red Dot to mineral reserve. At Seabee, we significantly expanded Mineral Resources at Gap Hanging Wall while continuing to generate early stage targets on the Fisher property.
It is worth noting that we've used the same price assumptions for reserves, $1,250 an ounce and resources $1,400 per ounce for the last four years, so reported gains are not price-driven. Note that we report our resources as inclusive of reserves and that all 2019 figures account for depletion. Marigold Probable Mineral Reserves are 3.89 million ounces of gold showing an increase of almost 18% as compared to 2018 and at a higher average reserve grade. The increase is due to Mineral Resources' conversion success at Red Dot Phases 2 and 3.
Referring to the chart which graphically shows the results to reserves at Marigold, depletion and model changes amounted to 330,000 and 50,000 ounce reductions respectively. Conversion at Red Dot and exploration additions combined with pad inventory changes added 960,000 ounces. I want to point out that the modeling changes remove marginal material, improving the economic performance of the mine.
In summary, the impact on Marigold's reserve position is significant, resulting in a year-over-year net addition of 582,000 ounces after depletion. As shown, Indicated Mineral Resources now total 4.94 million gold ounces and inferred mineral resources total 182,000 ounces.
For Seabee gold operations, proven and probable mineral reserves are 500,000 ounces at an average grade of 10.2 grams per tonne after depletion of 108,000 ounces. The reserve grade has increased by 10% compared to 2018. Recall that in 2019 we directed our exploration toward resource addition and that work has resulted in a year-over-year net 23% increase to Seabee's Measured and Indicated Mineral Resources after depletion, which now are 10,50,000 ounces of gold. Inferred Resources are 583,000 ounces and have increased by 21% compared to 2018.
The success of our resource addition at Seabee is due to the continuity in grade present at Gap Hanging Wall, which was a discovery that we announced in the fall of 2017.
At Puna, proven and probable mineral reserves totaled 49.7 million ounces of silver, an increase of 28%, reflecting the acquisition of the remaining 25% project interest that we did not already own. Chinchillas mining depletion, design and cost changes accounted for 1.4 million ounce reduction. Measured and Indicated Mineral Resources totaled 110.7 million ounces of silver including open-pit, underground, and stockpile inventory at the combined sites. Inferred resources totaled 42.7 million ounces of silver.
Regarding our 2020 exploration and development plans, we focus on growth at or near our existing assets. At the North American operations, there were Greenfields and Brownfields activities. Plans for 2020 include drilling activity increases at both Marigold and Seabee compared to previous years. At Marigold and Trenton Canyon, we plan on spending $12 million in 2020, a 29% increase compared to 2019. We intend to drill 14 kilometers at Valmy, East Basalt and Mackay pit, targeting reserve growth and 19 kilometers of drilling near Mackay, Crossfire and Valmy, directed toward resource growth.
Planned drilling the Trenton Canyon includes 29 kilometers toward oxide resource growth targets, plus additional work for project scoping and engineering studies. We began work at Trenton Canyon in the fourth quarter of 2019 and are confident in the potential to define resources here. With the recently consolidated land position we have commenced a $2 million core drilling program directed toward the discovery of higher-grade sulphide mineralization.
At Seabee, we plan on spending $12 million in 2020, a 37% increase compared to 2019. Exploration plans include 37 kilometers of surface drilling for resource growth near both Santoy and Seabee mines.
Underground drilling directed toward resource conversion and growth totaled 50 kilometers with 40% for Gap Hanging Wall and 8A conversion, with the remainder on other resource growth targets. Work at Fisher remains split between summer field programs and 12 kilometers of drilling on Batman Lake extension, Mac north and south and Fisher south.
Now over to Greg for a discussion of our financial results.
Gregory J. Martin -- Senior Vice President and Chief Financial Officer
Thanks, Carl. As you have heard from the others, our operating momentum continued through the fourth quarter, which combined with higher metal prices drove strong financial performance. The quarter-on-quarter trend through 2019 has been positive, so the expectations we laid out at the start of the year of sequential improvement in financial performance with the ramp up of Puna operations have been delivered.
Particularly in this past quarter, the contribution from Puna Operations was a notable improvement while Marigold and Seabee also continued their respective trends of delivering predictable strong performance. For the fourth quarter, we reported revenues of $177.6 million and income from mine operations of $58.9 million. These were increases of 71% and 256% respectively relative to the comparative quarter of 2018 and increases of 20% and 13% respectively compared to the third quarter of 2019. So positive trajectory to our operating performance.
Our net income for the fourth quarter was $19.5 million or $0.16 per share. This was well ahead of the loss reported in the comparative quarter and in line with the third quarter. Improvement in mine operating earnings relative to last quarter were offset by higher stock-based compensation expense, higher expensed exploration and higher tax expense. Stock-based compensation was driven by our strong share price performance and tax expense, which was partially driven by stronger operating margins at the mines.
However, similar to the third quarter, inflationary tax adjustments applied in Argentina added $6.8 million of non-cash deferred tax expense. Items under our control remained in line with historical and expected levels. Adjusted earnings for the fourth quarter totaled $36.6 million or $0.30 per share compared to $28.4 million in the prior quarter for an approximate 29% increase, demonstrating more clearly the quarter-on-quarter improvement in performance.
Turning to the annual numbers, these really highlight the shift in the company over the last year. Revenues of $607 million were 44% higher than the previous year. Mine operating earnings of $171 million were 123% higher than the previous year and net earnings attributable to our shareholders of $57.3 million or $0.47 per share or almost a 10-fold increase from the $0.05 per share in 2018. Adjusted net income from the year totaled $98.2 million or $0.81 per share, more than triple from the $0.23 per share in 2018.
Turning to cash flow, we continue to generate free cash flow during the quarter, adding $29.2 million to our cash balance that now totals over $0.5 billion. Cash generated by operating activities in the fourth quarter was $48.6 million, taking our full-year total to $134.2 million, an increase of 124% from the $59.8 million in 2018.
As I have commented in previous quarters, we continue to have significant working capital and concentrate receivables due to both the ramp up in volumes and increase in metal prices. As we maintain a steadier pace of concentrate sales, working capital will not continue to impact cash from operations.
Cash used in investing activities totaled $22.3 million, a reduction from the $29.3 million invested in the third quarter as seasonal construction at Seabee ceased and Marigold completed their pad build. All three mines came in under their guidance for total capital as the significant projects were well managed to budget and schedule.
The Chinchillas project which was completed $6 million under our announced and never revised budget has now been closed. With Chinchillas complete and the balance sheet strong, our focus remains on identifying high return opportunities at each mine and continuing our more aggressive investment in exploration for continued growth. We closed the year with $504 million of cash and through the strong performance of our investment in SilverCrest, marketable securities balance totaled $66 million. And today, our investment in SilverCrest is about $7 million higher than at year-end.
Our $75 million credit facility is undrawn and can provide additional liquidity if needed. So we're really well positioned to continue generating fundamental value within our assets and assessing opportunities to deploy capital. We are in the process of redeeming the $115 million of outstanding 2013 convertible notes. And once complete, our remaining debt will be the $230 million of convertible notes due 2026 issued last year. So debt is modest and termed well into the future.
We released our 2020 guidance in January which showed our expectations of growth at Marigold and Seabee and solid performance at Puna Operations. For 2020, we expect production of 425,000 gold equivalent ounces at approximately $740 cash costs per payable equivalent ounce. If both Marigold and Seabee can hit guidance midpoints, they would again, each set new respective production records.
Seabee continues to emerge as a significant free cash flow generating mine. At Marigold, with exploration adding significant life to the mine and with the approval of our EIS in 2019, we are continuing to invest in the infrastructure to support the longer mine life. For 2020, this includes further expansion to leach pad space and related infrastructure, dewatering infrastructure, and replacing two older high cost haul trucks.
In a similar situation at Seabee with Gap Hanging Wall emerging as a significant discovery, we are completing Phase I of the tailings expansion and moving directly into Phase II, which results in a more efficient construction schedule and provides tailings capacity into the 2030s.
Our balance sheet provides us the ability to optimize these assets for the long term. Looking forward to the first quarter, I will just remind listeners of the seasonality of Seabee capex and working capital as all physical goods and equipment are brought in over the ice road through February and March.
This seasonality of capital impacts Seabee's reported all-in sustaining cost in the first quarter as well. The macro backdrop looks positive here early in the year with precious metal fundamental strong and oil and other commodities remaining range bound.
With those comments, I turn the call back to Paul.
Paul Benson -- President and Chief Executive Officer
Thanks, Greg. So in summary, we continue to be very proud of our consistency, having met or exceeded production and cost guidance for the 8th straight year. We are well positioned to continue this momentum with 2020 production forecast to grow to approximately 425,000 gold equivalent ounces with strong margins at current metal -- precious metal prices.
We also continue to invest in our long-term future through exploration with strong results at both Marigold and Seabee. 2019 continued our track record of creating value by increasing Mineral Reserves and Mineral Resources each year and we expect to do the same this year.
Looking ahead to SSR Mining, our strategy remains consistent, focused on delivering safe production while investing in our assets and executing on our growth strategy to create value for our shareholders. Our outlook for 2020 and beyond remains bright.
This concludes the formal remarks of our earnings call. I'll now pass the line to the operator to take any questions you may have.
Questions and Answers:
Operator
Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Cosmos Chiu of CIBC World Markets.
Cosmos Chiu -- CIBC World Markets -- Analyst
Hi. Thanks, Paul and team. Thank you for the conference call here. Maybe my first question is on Marigold. Kevin, as you mentioned, there is a new leach pad, you'll start stacking on the new leach pad now. Can you speak to any potential positive impact of recovery on cycle time? As you know stack ore on a new leach pad, given that it's lower down, percolation is going to be faster, the leach kinetics. Anything positive that you can speak to.
Kevin O'Kane -- Senior Vice President and Chief Operating Officer
Sure. No, thanks for the question Cosmo and we started applying solution to that leach pad right at the tail end of Q4. And so we're seeing the benefits now. And so we should, it's positive for Q1. But it was part of our plan, it's part of our guidance, so there's nothing different than what you've already been advised or would have read.
Cosmos Chiu -- CIBC World Markets -- Analyst
For sure. And then I guess, you know, now that you've built a new leach pad, when is the next sort of construction of the next leach pad?
Kevin O'Kane -- Senior Vice President and Chief Operating Officer
We're in the process of approving the next leach pad, which would start construction this year. It's in our -- it's in our capital guidance for this calendar year and we're in -- we're in the early stages of developing a pad, that would probably be built the year after next or the tail end of next year. So it's an ongoing -- an ongoing process to make sure that we optimize the irrigation ratios and the leach times.
Cosmos Chiu -- CIBC World Markets -- Analyst
For sure. And how high are these? I haven't been to Marigold for a few years now. How high are these leach pad, some of the older leach pads like how -- how high did they go?
Kevin O'Kane -- Senior Vice President and Chief Operating Officer
They get to about 400 feet, so 121.6 meters.
Cosmos Chiu -- CIBC World Markets -- Analyst
Okay, great. Maybe, again, on Marigold but switching gears a little bit. Congratulations on increasing the reserves at Marigold. But I also noticed that total resources decrease a little bit due to depletion and in part due to revised slope angles. I'm just wondering if you can give us a bit more detail on that change in assumption. Is that based on what you've observed in the current pit or is it just based on being a bit more conservative as you consider going deeper into the pit?
Paul Benson -- President and Chief Executive Officer
Yeah, I'll just make a comment first and pass to Kevin or Carl. Yeah, you've got to remember that each year, we tend to move the focus of what we -- the objectives are in the exploration. This year, it was very much driven around getting to Phases 2 and 3 of Red Dot into reserves. So we didn't have drill rigs elsewhere looking for additional resources.
So, don't read too much into the drop in resources. That will be the focus this year. But in terms of the engineering slopes.
Kevin O'Kane -- Senior Vice President and Chief Operating Officer
Yeah, the -- as you would know when we first do the initial evaluation of the pits, we make assumptions for the slope angles and also where the ramps go and then with further engineering and our external consultants and reviewing [Phonetic] the size of the High Wall and Red Dot and the ramp configuration is different, which actually has an impact on the ultimate slope. It modified the slope slightly. But as Paul indicated, I mean, it's still early days and that final slope is quite some years away.
Paul Benson -- President and Chief Executive Officer
Yeah, Cosmos, I would also add that in addition to the cost and slope changes, there was a minor amount of loss at the north end of Red Dot, so we call that area in North Red Dot previously.
Cosmos Chiu -- CIBC World Markets -- Analyst
Great. Maybe moving on to Seabee quickly here, Seabee Santoy. You know you averaged about 950 tonne per day in 2019. You know, as you mentioned you were able to get to about 1050 tonnes per day in December. Is that kind of throughput sustainable? I only ask because if I were to take your 2020 guidance into consideration, and if I were to consider 1050 tons per day for 2020, your production guidance seems to be a bit conservative, let's use that word. So I'm just trying to reconcile those two?
And now, on that as well, if you can remind me what's the bottleneck right now at Seabee Santoy in terms of throughput. Is it the mill or is it the mining portion.
Paul Benson -- President and Chief Executive Officer
Yeah, I'll comment first and Kevin can add anything.
Cosmos Chiu -- CIBC World Markets -- Analyst
Thanks, Paul.
Paul Benson -- President and Chief Executive Officer
Yes. We've indicated, we've assumed 1050 tonnes per day for the year. So I'm not sure how you back calculate it, you must be making some assumption on a head grade or something like that. But yeah, we're comfortable -- we're comfortable with the guidance. And as always, we'll review it as we go through the year. But we're assuming 1050, the bottleneck is definitely the mine. What we've shown through some of the graphs in the presentation.
The mill can comfortably run at 1200 and we've had days it go as far up as 1400. So, focusing on debottlenecking in the mine and hopefully we can get it above that 1050 number, but that's certainly the focus for this year. Kevin, anything else?
Kevin O'Kane -- Senior Vice President and Chief Operating Officer
Yeah, no I think that's about it, yeah.
Paul Benson -- President and Chief Executive Officer
Okay.
Cosmos Chiu -- CIBC World Markets -- Analyst
Yeah. I only ask Paul because if it's 950 tonnes per day for 112,000 ounces last year and then 1050 tonnes per day for 110,000 to 120,000 ounces. That's what I mean. It's kind of flat production with increase in throughput. But I think I understand your point in terms of the head grade...
Paul Benson -- President and Chief Executive Officer
Okay, good one.
Cosmos Chiu -- CIBC World Markets -- Analyst
And then, maybe one last question here, if I may. Argentina. Puna, we've seen some of your competitors talk about the difficult situation in Argentina and some of your competitors have actually taken a writedown on it. Also talking about export taxes potentially increasing by about 3% beyond what was put out, I guess, 1.5 years, 2 years ago now. Could you comment on the export taxes and you know in terms of the working environment in Argentina and how you approach the -- how that might change your approach to Puna.
Paul Benson -- President and Chief Executive Officer
Sure. I'll let Greg go first.
Gregory J. Martin -- Senior Vice President and Chief Financial Officer
Sure, thanks Cosmo, I'd say, on balance, we're not seeing any real substantive changes in the operating environment there. Obviously, inflation continues to run high and the currency has been stable of late, but obviously depreciated a fair bit last year. So as we commented before our focus really is on that relationship between inflation and devaluation. That's what most effects the operating performance of the asset.
And as you saw from the fourth quarter, the asset is performing very well. Export duties were introduced a while back, they've stayed at the same rate in the adjustments that the government made recently had no impact on the duties that applied generally to the mining goods. So I think they continue to see mining as an important industry to generate export revenues and hard currency that is a requirement for the country.
And where we operate, up in the northern part of Argentina, we have a very I think supportive and cooperative relationship with the local authorities that continues to see good stability in the operation. So we did, as noted in our financials, we did test our asset for impairment we did not record any impairment charges as a result of that testing.
Cosmos Chiu -- CIBC World Markets -- Analyst
Great. Thank you. Those are all the questions I have. Thanks a lot.
Paul Benson -- President and Chief Executive Officer
Thanks Cosmos.
Operator
Our next question comes from Chris Thompson of PI Financial.
Chris Thompson -- PI Financial Corp -- Analyst
Hi, good morning, guys. Thanks for taking my questions. I think Cosmos asked a lot of the questions I was going to ask. But just generally looking at the capex costs, I mean I support your decision to invest in the assets. They're good assets. But generally speaking, looking at Marigold may be next year and you did allude to the fact that you're going to be continuing to build leach pads there. Can we expect similar sort of capex expenditure at Marigold?
Paul Benson -- President and Chief Executive Officer
We haven't given guidance for 2022 or 2021 year. So whatever is in the technical report, use that as a base. I think what Kevin alluded to, it's always a balancing act with leach pads. You can -- you can build -- if you don't build them they get higher you have other restrictions in terms of pumping solutions. So it's just the balancing act and we're trying to get that -- trying to get the optimum result there.
Chris Thompson -- PI Financial Corp -- Analyst
Yeah. Okay, good enough. Alright, guys, thanks a lot.
Paul Benson -- President and Chief Executive Officer
Thank you.
Operator
Our next question comes from Adam Graf.
Adam Graf -- B. Riley FBR -- Analyst
Hey guys, thanks for taking my questions. Just real quick, I think Cosmos used most of the questions up. But just wanted to -- just a quick question about extracting free cash flow out of Argentina. What's your current mechanism and will that change through time and will that present any challenges as far as you guys can see.
Gregory J. Martin -- Senior Vice President and Chief Financial Officer
Sure, Adam. Thanks for the question. Similar to how we've operated over the last number of years in Argentina, we'd been successful before through the previous number of years to extract the capital that we needed. We continue to have an intercompany loan structure in place that we used to fund part of the Chinchillas construction that provides one avenue and dividends are still an avenue for repatriation out of Argentina.
Again, everything we've seen, we haven't tested that mechanism of late, but certainly -- again, the government has continued to respect any of the regulations that are in place from our perspective.
Adam Graf -- B. Riley FBR -- Analyst
So Greg, it's your view that once the intercompany loan facility runs its course, you'll switch to dividends effectively and so far, you haven't seen any issues there for other operations extracting cash out of the country using that method?
Gregory J. Martin -- Senior Vice President and Chief Financial Officer
Yeah. Again, I won't -- I won't speak on behalf of others. We haven't tested the dividend mechanism of late, but in general, in regards to our other actions with the government on regulatory and fiscal and exchange issues, we have not run into any particular challenges as of this time period.
Adam Graf -- B. Riley FBR -- Analyst
All right. Fantastic. Again, congratulations guys on finishing up 2019 very strong.
Paul Benson -- President and Chief Executive Officer
Excellent. Thank you.
Operator
[Operator Instructions]
Paul Benson -- President and Chief Executive Officer
Yeah. No, I think we're looking at the queue, there aren't any more. I think Cosmo got all the question for us. So we'll leave it at that. So thanks very much, everyone. Have a good day.
Operator
[Operator Closing Remarks]
Duration: 40 minutes
Call participants:
Michael McDonald -- Director of Investor Relations
Paul Benson -- President and Chief Executive Officer
Kevin O'Kane -- Senior Vice President and Chief Operating Officer
Carl Edmunds -- Vice President of Exploration
Gregory J. Martin -- Senior Vice President and Chief Financial Officer
Cosmos Chiu -- CIBC World Markets -- Analyst
Chris Thompson -- PI Financial Corp -- Analyst
Adam Graf -- B. Riley FBR -- Analyst
