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SSR Mining Inc. (SSRM 0.91%)
Q3Â 2020 Earnings Call
Nov 12, 2020, 5:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good afternoon, everyone, and welcome to SSR Mining Third Quarter 2020 Conference Call. This call is being recorded. At this time, I would like to turn the call over for opening remarks and introductions.
I'd like to turn the call over to Michael McDonald, Investor Relations for SSR Mining. Please go ahead.
Michael McDonald -- Director, Corporate Development & Investor Relations
Thank you, operator. Good afternoon, ladies and gentlemen. Welcome to SSR Mining's third quarter 2020 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, EDGAR, the ASX, 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 disclosures in the relevant documents.
Joining us on the call this morning are Rod Antal, President and CEO; Greg Martin, our CFO; and Stewart Beckman, COO.
Now, I would like to turn the call over to Rod for opening remarks.
Rodney P. Antal -- Director, President and Chief Executive Officer
Thanks, Michael, and good afternoon, all. I'm very pleased to welcome you to our first quarterly call, following the completion of the merger with Alacer. Today, we'll be discussing our third quarter 2020 operating and financial results. It's so good to finally be talking about the new SSR, and I'm privileged to be leading the Company into its next chapter and having the opportunity to work with an exceptional team.
Building from our larger and fundamentally strong business, we have an exciting opportunity to firmly establish SSR as the premier mid-tier gold producer for the long term. Our journey is just beginning and I fully expect that our portfolio will deliver a number of attractive growth options in the future. The third quarter was an eventful one for SSR from navigating the global impact of COVID-19 pandemic, closing the zero-premium merger with Alacer Gold and ramping up both Seabee and Puna back to full capacity post the COVID shutdowns.
Post merger, we have a very strong and diversified asset base across four operating jurisdictions. In 2020, we will produce between 680,000 ounces and 760,000 ounces of gold equivalent. After allowing for the impacts of COVID, we have over 8.5 million ounces of gold equivalent reserves, which puts our weighted average mine life in excess of 10 years with Turkey providing longevity of around 20 years. We are in a peer-leading position due to our asset quality and low capital intensity growth going forward.
We have a clear focus on free cash flow that will influence every major decision we make. Not only is free cash flow generation going to be strong, but our starting point on the balance sheet is excellent with over $770 million of consolidated cash. Our exploration portfolio is extensive. We have a number of organic growth options in the portfolio, with over 20 near-mine and stand-alone exploration opportunities currently active.
Over the next few months, we have a number of value-enhancing catalysts planned. The first will be the upcoming Copler technical report, which will provide a refreshed view of the sulfide operations and demonstrate a longevity to our oxide gold production at Copler. In addition, we plan on providing a number of portfoliowide exploration updates on our greenfield and brownfield initiatives before year-end.
The last point to make is our integration efforts are on track and largely completed. We were fortunate that there was a close cultural alignment that has helped streamline the combination. Our team has done a tremendous job in a challenging time to bring the business together and I want to recognize them for their efforts that have gone above and beyond our normal high expectations. As 2020 draws to a close, we are firmly focused on delivering safe production and driving to a strong finish for the year.
Now turning to the next slide. ESG has always been ingrained in the culture of both SSR and Alacer. Going forward, we can leverage the in-house strength as a combined team to continue to do the right things and be recognized as a true partner to our employees and the communities where we operate. We have several different programs across all our operating sites. There are too many programs to call out today that I would like to highlight too.
The first is the continued investing in our local communities through established social development funds, where we are building capability and establishing sustainable businesses that are not dependent on the mines. And second, it's investing in schools and academic scholarships with a particular focus on encouraging local and female representation. From an environmental perspective, we hold ourselves in high regard and to a high standard. We have many examples of best practice, like being the first mine in the world to be certified under the Cyanide Management Code in Marigold. We are proud of our achievements, and we'll continue to be a leader in our approach to ESG.
Moving on to the next slide. With respect to COVID-19, we are focused on the protection of our employees and the local communities in which we operate. Both Seabee and Puna were rightly shut down for a period, while Marigold and Copler have been successful in navigating through COVID, though we had to adjust our operating plans along the way as circumstances dictated. All our operations continue to work with national and local authorities in accordance with applicable regulations and remain vigilant with respect to on-site activities.
We have implemented numerous mitigation measures such as testing, quarantining, ensuring physical distancing, and providing additional protective equipment. We are operating our corporate offices at a reduced capacity with all employees working remotely.
So, moving onto Slide Number 6. A few quarterly highlights before diving into the details. Operationally, we had a solid third quarter and are on track to meet our updated 2020 production and all-in sustaining guidance on the back of what is shaping up to be a strong fourth quarter. Gold equivalent production from all operations for the first nine months is 492,000 ounces with 164,000 ounces produced in the third quarter.
Our quarter three all-in sustaining cost was $1,034 per ounce. Copler and Marigold continued to operate reliably, with Puna and Seabee now back to steady state. On the growth front, we are busy on a number of fronts from continuing exploration drilling at a number of targets to finalizing the Copler District technical report.
From a financial perspective, we ended the quarter in excellent position with consolidated net cash of $315 million and anticipate a strong fourth quarter with robust free cash flow to the end of the year.
Moving on to Slide 7. I'm delighted to announce a corporate dividend policy beginning in quarter one 2021. We have been very thoughtful on our -- in our approach to capital allocation. Our capital allocation strategy going forward is to balance the continued investment in high growth, while maintaining peer-leading financial strength and providing sustainable capital returns to our shareholders. While our recurring quarterly dividend is expected to be the primary method of capital return, we will periodically evaluate supplementing this dividend from excess trailing free cash flow.
So with that, I'll turn the call over to Greg, who will discuss our financial performance in more detail.
Gregory J. Martin -- Executive Vice President, Chief Financial Officer
Thanks, Rod, and good afternoon to everyone. This is definitely an exciting time for SSR. I joined when we were a company with a single asset in Argentina, and to go forward positioned at the top end of the mid-tiers with four strong assets and one of the best balance sheets in the business is a great opportunity. Overall, I'm quite pleased with our third quarter. Even though Seabee and Puna operations were interrupted for part of the quarter, they contributed well with Marigold solid and Copler coming in strong over the quarter.
As you will have noted from our statements, we only recognized the operating and financial results for Copler within our consolidated statements for the two-week period post the September 16 transaction close date. Within that context, revenues totaled $225 million, with income from mine operations totaling $83 million. Attributable net earnings totaled $27 million or $0.19 per share. Each of these financial metrics were increases relative to the comparative quarter.
I'll talk about a number of factors related to the transaction that impacted our quarter shortly, but adjusted net income of $68 million or $0.49 per share is an impressive start for the merged company, with all four assets contributing to that result. Cash from operating activities was $44 million, with notable items being catch-up cash tax payments as COVID-related tax deferrals expired, working capital build up as Puna resumed concentrate sales, and the settlement of payables and accruals acquired through the Alacer transaction.
Like many of our peers, one of the principal impacts of COVID has been the necessity to defer capital projects to reduce risk of contractors interacting with our operating staff. While that situation has somewhat normalized, it will push some capital spend into 2021. Publishing these first quarterly statements of the new SSR really highlights one of the features of the merger, an exceptionally strong liquidity position to drive our strategy. Consolidated cash totaled $773 million with net working capital over $1 billion. We have a strong net cash position and well-structured low cost debt, so the balance sheet is in great shape and will get better.
So, let me briefly discuss the financial statement impacts of the merger. The most apparent is the transaction and integration costs we incurred in the third quarter of $15.7 million. This accounts for the majority of costs we expect to incur with the exception of certain limited integration costs that we'll carry forward through the next couple of quarters. The merger is accounted for as an acquisition of Alacer by SSR. As a result, we recognize the assets and liabilities of Alacer at fair value on the date of acquisition. This has the result of increasing the book value of mineral properties and current assets to fair value as described in Note 4 to our financial statements.
Future cash flows are not impacted by the resetting to fair value, but future earnings are. The assets impacted were inventories, finished goods, leach pad inventories and sulfide ore stockpiles. As these assets are processed, the associated production costs will increase, reflecting this recognition at fair value. This was evident in the third quarter as we sold the gold inventory acquired and produced from the heap leach. You will note a $19 million increase to production costs, principally due to these impacts.
Finished goods is a one-time impact, but heap leach will carry forward for a number of future quarters and the ore stockpiles, which equate to over two years of plant throughput will impact certain periods over the mine life as they are processed. Finally, the Mineral Reserves see a significant fair value bump, in this case just under $1 billion. So, as we mine and process these ounces, we will incur additional depletion expense of approximately $180 per ounce. So, as mentioned earlier, all non-cash impacts, but important to understand in estimating future income.
Next, it gives me a lot of satisfaction that we can announce the first dividend for the merged SSR commencing in the first quarter of 2021. It is strong evidence of the strength and maturity of our business. The base quarterly dividend will be $0.05 per share, representing an annual yield of approximately 1%. While this recurring quarterly dividend is expected to be the primary method of capital return, we will periodically evaluate supplementing this dividend from 12-month trailing excess free cash flow in the form of incremental dividends and share buyback programs.
I have confidence the outlook for metal prices and our business will provide significant opportunity for capital returns as we continue to deliver shareholder value from the portfolio. Finally, I look forward to a great fourth quarter. We will have the contribution of Copler for the full quarter and expect all four assets to close the year strongly in an environment of robust metal prices.
With those comments, I'll turn the call over to Stewart, who will discuss our operational performance and organic growth in more detail.
Stewart Beckman -- Executive Vice President, Chief Operating Officer
Thanks, Greg. As always, I'll start with a comment on the health, safety, environment community relations. A considerable amount of energy has been extended through and before the integration process to ensure that we manage HSE and the risk in the business. Experience has shown us that in periods of change, we have distraction and risk. COVID has added an overlay of protocols and anguish to everything in 2020. We have a well-resourced and experienced HSE and operations teams in SSR, who have managed to achieve impressive results over the years.
Our operations managers have done an impressive job of maintaining our HSE standards, while managing the business and in some cases restarting them in the COVID world. Our safety metrics were disappointingly slightly down through the middle of the year, but are now improving. Protecting and caring for our people, the environment, and the communities, underpins our business performance and will continue to be a key focus area of all of our teams. Each of the sites has a slightly different approach to dealing with COVID management, tailored to the situation and the specifics of the site. I'm confident that all of the sites have taken a very strong and proactive stance against COVID and are increasing protocols ahead of rising statistics.
Now, a brief comment on each of the mine sites. Please move to Slide 10. Copler has not had a direct interruption through the COVID pandemic. There have been some indirect impacts, including some impact on production and the pushing back of some work and costs into next year. Through the first nine months of the year, both oxide and sulfide plants produced a total of 224,000 ounces of gold for approximately $214 million in pre-tax free cash flow. There have been some reductions in workforce as a result of quarantining, which have affected operations. As a result, there were some changes made to the mine plan to compensate.
Copler remains on track to achieve full-year guidance. The sulfide plant continues to operate at above design rates, compensating for slightly lower-than-planned grade and recovery. The change to the mine plan ensured that the Manganese pit cutback was completed on time, and we are now starting to mine the higher grade ore in this pit.
Autoclave 1 was inspected during a brief plant shutdown in July and found to be in excellent condition. The autoclave 1 shutdown, previously planned for the second half, has now been pushed back to 2021. There are no autoclave shutdowns planned for the rest of the year. Exploration in the region and within the Copler mine area continues with encouraging results, which we plan to share soon.
Along with the other targets that we've previously discussed, our VP, Exploration hypothesized the presence of a porphyry intrusion relatively close to the ultimate bottom of the Copler Main pit. Mid-year, we started testing this target, which we've creatively named C2, and having intersected mineralization consistent with a porphyry intrusion. We will share the data when the analysis in the QA/QC is complete.
Engineering and early works through the supplemental flotation plant advanced during the quarter. The flotation plant will increase the sulfide plant throughput and lower unit costs. The impact of the flotation plant is being incorporated into the upcoming Copler District technical report. The updated technical report will also contain a PEA, outlining the preliminary development plan for Ardich. As a reminder, Ardich is still being explored and the resource will expand.
The Ardich PEA represents only drilling from -- up to 2019. We restarted drilling in March-April of this year, after a bit of a COVID delay. Subsequent 2020 drilling confirms extension to the mineralization. We will shortly provide an update of the exploration at Ardich, including both infill and step-out drilling. The technical report will be released before the end of the year, after finalization of engineering and business assessment and of course approvals.
Please move to Slide 11 and we'll talk about Marigold. Marigold continue to operate through COVID, a great credit to the mine management. Again, there have been indirect impacts that affect both '20 and '21. Total material moved was another quarter above 20 million tonne, despite some teething issues with our new hydraulic shovel. We believe these issues are now mostly behind us.
Shore holes into next year will facilitate higher tonnage rates for the mine. As expected, the head grade increased in the third quarter versus previous quarters. Overall, we stacked just over 73,000 ounces recoverable in Q3 and expect to finish the year within guidance. All-in sustaining costs at $1,243, took a hit from the increase in royalties as a result of the gold price, as it did at all of the sites. High gold prices are a nice problem to have.
Exploration drilling continued across the property with some interesting results. With land acquisition over the last few years, we are accessing the plethora of opportunities across our very large package in the region. Very prospective areas on the edge of both mining areas and close to all tenement boundaries are some of the areas of focus. Obviously, we avoided showing our excitement fit these while we negotiated to purchase the abutting areas. We will provide some update on the Marigold tenement exploration in our group exploration updates later this year.
Please move to Slide 12. Seabee is a great high-grade mine with lots of potential. From a health and safety perspective, we've been doing a lot of work to comply with the new diesel particulate matter requirements stipulated by the province of Saskatchewan. This involves a lot of improvements to existing equipment, as well as we recently started commissioning of a new ventilation raise and fans, which has made a very big improvement as designed.
As you know, we shut Seabee down as a precaution for COVID. This action also pushed some working capital into 2021. Seabee ramped back up in August and in September, we had a record milling month of an average of 1,271 tonnes a day. This included our best-ever one day throughput of 1,522 tonnes a day. For perspective, the year that prior to SSR Mining purchasing Seabee, the mill averaged 760 tonne a day throughput. In the PEA that was released subsequently in 2017, mill throughput was estimated to average 1,050 for the whole life of mine. So the current throughput rates demonstrate upside to the production profile.
The mine is currently bottleneck at Seabee. There are also real continuous improvement opportunities in the mine at Seabee and this will be an area of considerable ongoing focus. We recently approved the replacement of an older jumbo, along with an additional jumbo for the mining fleet. These purchases will come across the ice road in early 2021. During the shutdown for COVID, there was a lot of maintenance of both processing facility and the mobile mining equipment, which will support productivity going forward.
Seabee has a great exploration potential, both immediately on strike in the current mining areas and in the very large tenement package, along with the contiguous Fisher tenements. You may have seen that we recently satisfied the earning requirements at Fisher and are now 60% owners, with an option to increase to 80% in the future. We are looking to increase exploration around the mine this year. When we do the corporate exploration update later this year, we will update you on some of the interesting exploration results from Seabee and Fisher and from our productive summer program at Amisk, which is about 50 kilometers to the South of Seabee.
Now, please move to Slide 13. Puna ramped back after a hiatus for COVID. Infection rates in Argentina, including the Puna, reached well into the 20% range. Though we've seen generally pretty low severity and few hospitalizations, our team has done a fantastic job of isolating the mine. There is, of course, a cost of very tight COVID controls. The mine and the plant have ramped back up really well and the plant is running regularly at above designed throughput and recoveries. The tailing pumping system that caused us some consternation last year now appears to be fully resolved and in control.
On the back of higher silver prices and low cost, Puna is forecasting to produce good cash flow going forward. An all-in sustaining cost of $11.26 for the quarter despite the shutdowns and COVID demonstrates the potential of Puna. I'm very excited to see what the team can deliver there.
Now, I'll move to Slide 14. I've covered off most of this already. So in summary, our focus is on, first, operational discipline and continuous improvement to deliver from our tremendous operating assets; secondly, leverage off our fertile organic growth portfolio. With our immediate focus on converting some of the near-mine low cost prospects into production, you will get a look at the first of these or the next of these when we reveal Ardich PEA in the Copler technical report in the next few weeks.
With that, I'd like to close and hand back to Rod.
Rodney P. Antal -- Director, President and Chief Executive Officer
Well, thanks, Stewart and Greg. So despite the challenges thrown at us by COVID, we've done an amazing job managing our operations, completing the merger and integrating both companies into the new SSR. The announcement of a dividend highlights the financial strength of the business and a responsible approach to capital allocation. And finally, we are lining up a number of catalysts that will show the value and exciting growth potential from within our portfolio.
So with that, I'll pass the line to the operator and take any questions you might have. Hello, operator?
Questions and Answers:
Operator
Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Ovais Habib of Scotiabank. Please go ahead.
Ovais Habib -- Scotiabank -- Analyst
Hi, Rod and team, and congrats on a good quarter. And thanks for taking my questions. Just a couple of quick questions from me. Just starting off with Copler, great to hear how well the autoclaves are performing. You mentioned the autoclaves shutdown is now -- or autoclave number 1 shutdown is now expected in 2021. Is this shutdown expected in the first half or second half of 2021?
Stewart Beckman -- Executive Vice President, Chief Operating Officer
Per scheduling, I think, in the first quarter at this point.
Ovais Habib -- Scotiabank -- Analyst
The first quarter. And I mean, in terms of the shutdown that you saw in the autoclave number 2, in terms of how well the ramp-up has gone, is there any kind of optimizations or anything that you guys need to do within those autoclaves that you're seeing, or is this just a routine shutdown that you're expecting in the first half -- the first quarter?
Stewart Beckman -- Executive Vice President, Chief Operating Officer
No, it's just a routine shutdown. The main driver for this one will be the replacement of the agitator blades because they're a ware item and eventually they wear. They've lasted much longer than we had expected too, but we're expecting to have to replace them like the first quarter.
Ovais Habib -- Scotiabank -- Analyst
And just then moving onto exploration drilling at Ardich, you mentioned that recent drilling has started around the April time frame. Has that been mostly step-out and infill? And can you give us an indication as to any sort of preliminary results that have come according to expectations?
Stewart Beckman -- Executive Vice President, Chief Operating Officer
Yeah. So the infill drilling's confirmed what we expected to see and yields. And then, we've been stepping out around the existing resource. When we issue the update in the next few weeks, we're planning on breaking it out. So you can see what's infill and what's step out.
Ovais Habib -- Scotiabank -- Analyst
And just confirming, none of this will be included in the study?
Stewart Beckman -- Executive Vice President, Chief Operating Officer
No, no. Well, the technical report, as you know, we have to pick a point in time. So we closed, we prepared the technical report, and this is subsequent. So it's all upside to what you'll see in the technical report.
Ovais Habib -- Scotiabank -- Analyst
Okay. And then just moving on to Seabee, and then I'll jump back into the queue. But in terms of Seabee, throughput was definitely -- you're hitting record throughput levels. Is that expected to be sustained at current levels going into Q4 and 2021? And also can you give us any indication of what the stockpile grade for the 17,000 tonnes is?
Stewart Beckman -- Executive Vice President, Chief Operating Officer
The challenge for the Seabee in the longer term is the mine rather than the plant. So, we are putting some extra equipment in them, my comment regarding the jumbos. So new jumbos. There are some requests to some other equipment and we're working on improvement plans to get the mine rate up in order to be able to feed the plant at a higher rate. So, I'm not promising anything beyond the numbers that you previously would have seen. It will take a while for us to get some traction, but there is definitely good upside at Seabee.
Ovais Habib -- Scotiabank -- Analyst
And then, just any indication as to what you can give us, the information on the 17,000 tonnes of stockpile grade?
Stewart Beckman -- Executive Vice President, Chief Operating Officer
It's a very small stockpile, so, it's pretty much just around, say -- it's around about the average grade that's feeding the plant.
Ovais Habib -- Scotiabank -- Analyst
Got it. And I'll leave it there, guys, and jump back into the queue. So, thanks.
Stewart Beckman -- Executive Vice President, Chief Operating Officer
All right. Thanks, Ovais.
Operator
Our next question comes from Cosmos Chiu of CIBC. Please go ahead.
Cosmos Chiu -- CIBC World Markets -- Analyst
Hi, thanks. Thanks, Rod, Stewart and Greg, and very good financials today and certainly good to see that you've put in a dividend here. I guess the market likes it as well. Maybe first off on Copler. As you talked about the cut back here in Manganese pit is still on time and looks like it's going to start contributing some higher-grade material. Is it -- can you remind me, is it both the oxides and sulfides that will benefit from it? And what's the magnitude in terms of the grade improvement versus the Main pit here?
Stewart Beckman -- Executive Vice President, Chief Operating Officer
Yeah. So there are -- there is a small contribution of oxide. The contact is sub-vertical in Manganese pit. So when we get to the bottom of the pit, we still do get small amounts of oxide. And with regards to the grade, I don't think we've disclosed sort of what the incremental increase will be. But you remember that Copler mining rate has always been higher than the processing rate, as it was in the original technical report. So, we do feed the higher grade as it comes to the plant. We are, as I've discussed on previous calls, always having to juggle grade and chemistry, and it's one of the advantages that we'll have when we get the flotation plant in, that will have a bit of a disconnect between the chemistry because we'll have a bit more control over sulfide grades and being able to manage down carbonate reporting to the autoclaves.
Cosmos Chiu -- CIBC World Markets -- Analyst
For sure. Understood. And then, again, on Copler here, as you mentioned in the MD&A, and on the TFS construction, you had to slow it down a little bit. However, you're still advancing ahead of operational requirements. With that said, in an ideal world, would you want to catch up on that construction later on, maybe some time in 2021? And is that why you've talked about some of the capex catch-up in 2021?
Stewart Beckman -- Executive Vice President, Chief Operating Officer
So with the tailings dam at Copler, another way to think of it is the waste dump for the mine. So we take the confidence suitable, mostly limestone material, from the mine and use it for the placement with compaction into the wall. And as a result, the wall -- the raise at the TSF is driven mostly by the mining rate rather than the plant requirements. So, we were a long way ahead of where we needed to be. And when we didn't have enough drivers, what we did was found an area to stockpile it or -- sorry, the tailings dam wall, material path way to the tailings dam so that we could free the fleet back up to go into the mine and work. Now there is a small cost associated with that because we have to pick it back up and then take it the rest of the way. So there is a cost to pick it up at some point in the future to move it out to the tailings dam. But we're are a long way ahead of where we need to be in the tailings dam and we will remain there.
Cosmos Chiu -- CIBC World Markets -- Analyst
For sure. Again, maybe moving ahead out to Marigold here. As you talked about, you've been transitioning from the lower levels of Mackay 5 to now the upper levels of Mackay 4, and I think Phase 8 is also coming in. You talked about the grade being lower year-over-year due to the fact that you're transitioning into the upper levels of Mackay 4. Again, I have not -- I haven't been to Marigold for a while now. But can you remind me in terms of -- I don't remember a lot of grade variability, we turned at different phases. But when are you getting in and out of it? Could you give us some color in terms of the grade profile, maybe intermediate term and also potentially longer term as well?
Stewart Beckman -- Executive Vice President, Chief Operating Officer
I can give you a part of that and we'll have to take the risk on those. You're correct. We are transitioning out of Mackay 5 and 6 and coming back up into 4 and 8 now, and that will we be back down in Mackay 5, I think, about the second and third quarter, but I'll have to confirm those numbers for you going forward.
Cosmos Chiu -- CIBC World Markets -- Analyst
But I guess, as you go deeper -- as you transition deeper into the mine, you get higher grade sometimes. As you're at the upper levels, you get lower grade, and then you would come to that kind of mix.
Stewart Beckman -- Executive Vice President, Chief Operating Officer
Yeah. We have been below the reserve grade and we're moving back toward the reserve grade as you would expect.
Cosmos Chiu -- CIBC World Markets -- Analyst
Okay. And then maybe one last question here on Seabee Santoy. Stewart as you mentioned, there is the ice road that's needed every year to replenish your inventories, your supplies. Any kind of concerns in terms of -- with COVID-19 impacts and whatnot, can you remind us, I guess, number one, what is the timing of building the ice road and number two, do you foresee any kind of impact given the current pandemic?
Stewart Beckman -- Executive Vice President, Chief Operating Officer
So, no, we don't expect to see any impact. We build the road ourselves with our own team, and the team is ready to go to do that work as they normally would. We start building it at the beginning of next year. We don't have to bring quite as much as we would normally bring across the ice road this year. Because we were shut down for a period, we've got those materials and inventory supplies on site already. So it won't be as big year as it usually is coming across the ice road, but we don't see any impact from COVID in our ability to be able to do that.
Cosmos Chiu -- CIBC World Markets -- Analyst
And again, when are you going to start building it? When is it going to get cold enough?
Stewart Beckman -- Executive Vice President, Chief Operating Officer
I think they start in January. Certainly, one -- they need to wait for it to start to freeze and then they may start to work. Then, they progressively take smaller trucks across to get it to harden, so moving the equipment across it hardens it. And then usually by about February, they're getting ready to start to run it.
Cosmos Chiu -- CIBC World Markets -- Analyst
And maybe one last question, maybe for Rod here. Again, taking a step back, looking at the big picture here, clearly one key catalyst is the Copler technical report coming out and it's great to see that exploration results are coming out as well. But again, when can we expect -- are you expecting to put out some kind of a longer-term sort of guidance, maybe three-year guidance in terms of production and costs? And on top of that, as you talked about, Rod, you're looking at optimizing the portfolio. And when can we start expecting more details in terms of capex in terms of what's in the core portfolio, what might not be? Certainly, there is a pit area that's in it, there was some chatter or some talk previously about new trucks at Marigold, just wondering about timing and what kind of detail could we expect? Thanks, Rod.
Rodney P. Antal -- Director, President and Chief Executive Officer
That was a long question, Cos, I appreciate it. So, I think, we'd sort of say as a new team that we're relieved to get the quarter three results and work behind us because that's been important for us to sort of demonstrate the strength in the business and as we're now moving forward. I think in the meantime, we've been busily working on bringing the organizations together and all, so I'm ensuring we stand things up. And as part of that developing the catalyst reach and announcements that will come out here as we close 2020 off, and then moving into '21 starting to look more about in the exploration and growth area, and particularly how it all sort of plays to give us.
So I think first things first, we finish the year, we've got catalysts already lined up as we've outlined in the quarterly results, and then into next year, starting to line all those up together and seeing how they're playing in terms of our growth profiles and portfolio management moving into 2021. So we've got plenty on our plate. I'm pretty decided by the growth potential and I think it sort of plays out.
When you look at our capital allocation strategy, clearly we've got an eye into the business to ensure that we're continuing to reinvest. We're continuing to ensure that we have, yeah, the balance sheet to bring some of these opportunities forward and returning capital to our shareholders. So, I think we've covered a lot already as a new team, but we've got a fairly aggressive plan moving into '21 as well.
Cosmos Chiu -- CIBC World Markets -- Analyst
Thanks a lot, Rod, and that's a great answer. And thanks again.
Operator
Our next question comes from Dalton Baretto of Canaccord. Please go ahead.
Dalton Baretto -- Canaccord Genuity -- Analyst
Thanks, operator. Good evening, everybody. Rod, I'd like to start by wishing you and your team all the very best for the new company. That said, it is a very different company than Alacer, and so I'd really like to get a sense for how you are now viewing the world through the SSR lens? In particular, I'd love to get your thoughts and how you're thinking about growth versus shareholder returns, and then also risks from a jurisdictional, from a balance sheet perspective? And then just finally, your thoughts on silver given SSR's legacy operations as well as some projects?
Rodney P. Antal -- Director, President and Chief Executive Officer
Look, I think, Dalton, when we -- when Paul and I were talking to you about the merits of the merger and bringing both companies together, what we saw was a very close cultural alignment. And in the lens that we look through, both businesses were nearly similar and I think that held true to where we are today. So from a lot of prospects it's business as usual and getting the team to get going and starting to think about what are we doing as a business, what do we need to deliver, what's important, where do we prioritize our capital for the growth, a lot of the elements and framework was already in place and thoughts were in place. So that's why I think, in a lot of regards, we've hit the ground running. And that's what you're seeing, obviously, play out here with the quarter three results and a number of the other catalysts coming up further in the next -- in this quarter and moving into next year.
So, we're in really good shape and that shouldn't be a surprise to anyone because we did talk about it. In terms of prioritizing some of that growth opportunities, I've said a few times that what we see in front of us right now is low capital intensity across the portfolio because a lot of them are brownfields opportunities at a near-mine. But of course, we have a number of exciting greenfield opportunities within the portfolio, quite an extensive allotment there that we're progressing through and looking how that might play out into our capital needs moving forward as we continue to evolve the SSR story beyond this year and probably beyond next year as well. And I think that plays out. I mean our capital allocation strategy that I just mentioned, clearly there is an element that we want to retain money to grow and invest because that's the best bang for the buck for our shareholders and high-yielding growth, and we'll see how that plays out.
So we've got it all before us, we got a great platform to start with, we are off to a good start and look forward to representing more of these as we move into next year.
Your last question on silver, now clearly with Puna, specifically people have asked about the future of Puna. Puna is a great contributor to the group level in its cash generation. So it shouldn't be lost on folks that for us while it still does that and still generates on a per ounce basis great free cash flow, it's welcome within the portfolio against the other three operations. So that's all going in proposition and that hasn't changed at all, and we'll obviously continue to assess Puna in the longer term to see whether there are other opportunities around it as well that it may actually evolve here into something different. So that'll be part of our thought processes moving into '21 as we continue to look at all the organic growth we have.
Operator
Our next question comes from Daniel Morgan of UBS. Please go ahead.
Daniel Morgan -- UBS Investment Research -- Analyst
Hi, Rod and team. First question just on Copler. Are you back on reasonable mining levels? Can you just discuss the COVID impacts at Copler and maybe just touch on the other assets where you're at -- on that issue as well? Thank you.
Stewart Beckman -- Executive Vice President, Chief Operating Officer
Yeah. So Copler's back up to full mining. Copler has actually got rapid testing up and running at site now. They're still isolating people for a week when they come in, but they're doing both antigen testing and testing for the virus itself, which they can turnaround in about an hour. So, we've got better control and that things do seem to be improving in Puna. They had very high rates, as I said in my talk, they were up getting 25% positivity rates with people. It hasn't just in the last week or two really markedly dropped down. I guess that means everybody's had it and they're immune, but there -- so things seem to be getting a bit easier there.
At Marigold, they've got quite a lot of controls in place to control people coming to site and ensuring it. As you may know, Nevada where you're seeing an increase in rates, but the protocols that we've got in place are well-established now and it's not impacting us from a production perspective.
And then, lastly at Seabee. Seabee, we have had some issues with planning, particularly where we have quite a lot of indigenous folks coming in from sort of remote areas and where there are instances where we -- and from Saskatchewan as well, where there are instances of family members or friends being positive, we have to delay them coming back to site. So, we are seeing some impact, but it's not as much as it was previously.
Daniel Morgan -- UBS Investment Research -- Analyst
Okay. Thank you very much. And the grades being stuck to Marigold have seen a big uplift. Can you just talk about what you expect in the next couple of quarters? I imagine that will go up toward half a gram or more of a Q4 and into Q1. Is that wrong?
Stewart Beckman -- Executive Vice President, Chief Operating Officer
Now, we start to head back up toward the reserve average, I'm not sure they're going to get to 0.5 grams in those periods. I think it's a little bit below that, but heading back toward the reserve numbers.
Daniel Morgan -- UBS Investment Research -- Analyst
Okay. And then, maybe just the dividend, just keen to explore the capital return framework that you've outlined a little bit more. So great to see a dividend earlier than I had thought, the 0.5 -- sorry $0.05 per share, which is the basis, is that just every quarter you're going to pay that? And then, just wondering how the supplementary works, is that every quarter you'll look at the free cash flow for the quarter behind you and go, OK, we're looking good and payout a supplementary or is it something that you might do on more a half year or annual basis, look at the supplementary?
Gregory J. Martin -- Executive Vice President, Chief Financial Officer
Thanks, Dan. It's Greg. I'll just take that question. So as you say, we're certainly pleased to have the initial dividend announced and we'll start paying the regular quarterly dividend at $0.05 per share starting in Q1 of 2021. And we will look at capital returns as one of the uses of our capital compared to as Rod and Stew talked about lots of opportunity we see in the portfolio.
So, we will look at those supplemental dividends on a trailing 12-month attributable basis. So as we start to bed down the combined business and get those results put together, the Board will periodically review that. So I think, give us a little bit of time here to get things settle down and then the Board will start to look at those supplemental returns, and we'll be comparing incremental dividends against share buybacks just depending on market conditions and against other needs within the portfolio.
Daniel Morgan -- UBS Investment Research -- Analyst
So on that, and a follow-up question, just on the mechanics, what do you need to do mechanically to get a buyback in place? Forgive me, I'm not as familiar with, perhaps, Canadian law or jurisdictions regarding this. Do you need AGM approval or the Board resolution, how would you do that? And also a follow-up question on that is, how do you make the assessment of a buyback versus a dividend?
Gregory J. Martin -- Executive Vice President, Chief Financial Officer
Yeah, thanks. So within Canada, there is a normal-course issuer bid structure that allows you some buyback opportunities tied to your liquidity, so a certain amount of volume. So that is one structure. If you -- if we wanted to do a more significant piece, then, yes, it's -- there is more regulatory and other approvals required.
And in terms of the trade-off, it's really going to be driven by really where we see market valuation conditions overall. And again, if we see an opportunity where that makes more sense for our shareholders, again, this will all be focused on the shareholder lens in terms of how we'll make that decision. If we see that as being [Phonetic] a preference use of capital, we'll move in that direction.
Daniel Morgan -- UBS Investment Research -- Analyst
Okay. Thank you very much for your responses.
Gregory J. Martin -- Executive Vice President, Chief Financial Officer
Thank you.
Operator
[Operator Instructions] Our next question comes from Mike Parkin of National Bank. Please go ahead.
Mike Parkin -- National Bank Financial -- Analyst
Thanks, guys, for taking my questions, and congrats on a good quarter. Just a follow-up there on the NCIB, I'm assuming that's the vehicle you pursue like a share buyback. Would you be using like a Pena [Phonetic] valuation at something below spot, like something your trailing 12-month average or something to kind of determine whether or not you're active within NCIB versus a cash payment.
Gregory J. Martin -- Executive Vice President, Chief Financial Officer
Yeah. Thanks, Mike. Obviously, we'll look at a number of general market conditions in addition to specific -- any specific factors that are playing out. So, I don't want to get too specific on it because obviously we see -- we're in a cyclical business here and we see -- we can see a lot of volatility in market conditions over time. And so, again, we would be looking at it. Over long-term valuation part, certainly it wouldn't be our intent to use that structure unless we really felt we were in a strong position to do so on a valuation perspective. So I think, as we said, we see the quarterly dividend as the primary recurring return of capital, and then we will look at these on a supplemental basis. So I would again focus you in terms of what we've said there around the dividend being the primary capital return piece.
Mike Parkin -- National Bank Financial -- Analyst
Okay. Yeah, it makes sense. Switching over to some of the stuff that's coming down the pipe in the next few weeks. With respect to Ardich, you mentioned how it will be PEA, what are the next steps after that? Are you going to go through like a full feasibility study? Or given track record and the experience, it's a regional kind of satellite for you? Are you more comfortable having an earlier stage economic analysis on it to move ahead with the construction decision?
Stewart Beckman -- Executive Vice President, Chief Operating Officer
Yeah, thanks for that. So, we've determined to make it a PEA because we're still exploring it, so it's still growing. We wanted to give you an indication of what our expectation was for the development and the development potential for it. It's quite separate from Copler and that it's removed, and we'll have to spend some capital on it and then bring that across and process it at the Copler plant with an expansion of the heap leach at Copler. That's all incorporated into the PEA. If we'd gone down the path way of doing reserve, we could have either presented a smaller case that wasn't as indicative of what we expect it to be, and then had to have done a subsequent reserve.
Our expectation is, we'll issue this. It's, as I said earlier, it's a point in time and it represents a point in time development opportunity, but the resource is, obviously, already grown outside of that, and our plan will be sometime in the next year or so to issue an update. And at that point, it will convert into a reserve, most probably a reserve in the grade of Copler, but we'll see. But it will be a reserve in the next year or so.
Mike Parkin -- National Bank Financial -- Analyst
Okay. So spending should be pretty much -- not much other than exploration dollars during the next 12 months?
Stewart Beckman -- Executive Vice President, Chief Operating Officer
No, no. We don't have a lot to spend. So, obviously, we've got the development cost to the metallurgical test work and those types, but it's off the order of $10 million.
Mike Parkin -- National Bank Financial -- Analyst
Okay. Just with Seabee on an exploration standpoint, you do tend to kind of do more of your expansionary step-out drilling in the winter time. What is it that you're aiming to kind of focus on? I remember Batman zone looked pretty exciting last year with the results coming out of there, plus some additional intercepts along the Santoy Shear. Is it follow-up work there? Are there additional targets that you're aiming to test?
Stewart Beckman -- Executive Vice President, Chief Operating Officer
There's quite a number of targets along that mineralized trend that goes down through Fisher and then branches up also to the, I guess, to the North -- Northwest as well, and we have a series of targets. So in the exploration, you'll see that there is some drilling as well as field exploration in those areas as well as in Amisk, field exploration in Amisk is a bit further away, and in and around Santoy itself. And of course, we've been working on the Gap Hanging Wall over the period as well, and we're getting ready to convert that into a reserve.
Mike Parkin -- National Bank Financial -- Analyst
Okay.
Stewart Beckman -- Executive Vice President, Chief Operating Officer
We are looking this year to maybe invest a little bit more into exploration in around Seabee to give ourselves a bit of a longer time horizon for decision making.
Mike Parkin -- National Bank Financial -- Analyst
Okay. And then, can you just remind us on what you need to do to take that ownership up on Fisher from 60% to, I believe you said earlier, 80%?
Gregory J. Martin -- Executive Vice President, Chief Financial Officer
Yeah. Thanks, Mike. It's Greg here. So it's really just a one-time $3 million payment that's due to our partner to do that to increase from 60% to 80%. And we'll look at that here as we work through the next number of months.
Mike Parkin -- National Bank Financial -- Analyst
Okay. Thanks guys. All my other questions were answered, so thanks very much and congrats again.
Gregory J. Martin -- Executive Vice President, Chief Financial Officer
Thank you.
Operator
This concludes the question-and-answer session. I would like to turn the conference back over to Rod Antal for any closing remarks.
Rodney P. Antal -- Director, President and Chief Executive Officer
Well, thank you, and thanks operator. I want to appreciate everyone for participating today on our first call as a combined entity, and wish you all a good day. Thank you very much.
Operator
[Operator Closing Remarks]
Duration: 59 minutes
Call participants:
Michael McDonald -- Director, Corporate Development & Investor Relations
Rodney P. Antal -- Director, President and Chief Executive Officer
Gregory J. Martin -- Executive Vice President, Chief Financial Officer
Stewart Beckman -- Executive Vice President, Chief Operating Officer
Ovais Habib -- Scotiabank -- Analyst
Cosmos Chiu -- CIBC World Markets -- Analyst
Dalton Baretto -- Canaccord Genuity -- Analyst
Daniel Morgan -- UBS Investment Research -- Analyst
Mike Parkin -- National Bank Financial -- Analyst
