SSR Mining Inc. (SSRM) Q4 2020 Earnings Call Transcript

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SSR Mining Inc. (SSRM 1.96%)
Q4 2020 Earnings Call
Feb 17, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, everyone, and welcome to SSR Mining's Fourth Quarter and Year-End 2020 Conference Call. [Operator Instructions]

At this time for opening remarks and introductions, I would like to turn the call over to Brian Martin, Investor Relations for SSR Mining. Please go ahead.

Brian Martin -- Director, Corporate Development And Investor Relations

Thank you, operator. Good day, ladies and gentlemen. Welcome to SSR Mining's Fourth Quarter and Year-End 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 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 this call are in U.S. dollars, unless otherwise indicated. All references to cash costs and all-in sustaining costs are per payable ounce of metals sold. We will be making forward-looking statements today so please read the disclosures in the relevant documents. Joining us on the call today are Rod Antal, President and CEO; Greg Martin, CFO; and Stewart Beckman, COO.

Now I'd like to turn the call over to Rod for opening remarks.

Rodney P. Antal -- President And Chief Executive Officer

Thanks, Brian, and good afternoon and good morning to you all. 2020 was truly a transformational year for SSR Mining as we completed the merger and integrated Alacer Gold. We delivered a number of value-enhancing catalysts across our portfolio and successfully navigated the challenges presented by the COVID-19 pandemic. During this period of unprecedented change, we met our 2020 objectives with all four of our operating sites, exiting 2020 with momentum and clearly defined growth initiatives, which we'll touch on later in the presentation. I'm proud to announce we declared our inaugural quarterly dividend this morning, in line with our recently announced capital returns policy, which is designed to maintain balance sheet strength, fund future growth opportunities and return capital to our shareholders. Our balance sheet, with $457 million in net cash and continuing peer-leading free cash flow, will allow us to assess additional capital returns in the form of supplemental dividends and/or share buyback programs moving forward. From a growth perspective, we delivered a number of exciting catalysts highlighted by the release of the Copler technical report, which demonstrated the scale, quality and long-term value of this asset.

The report mainly featured Ardich and was the first step in defining the significant organic growth potential of this world-class asset. We also announced a discovery of C2 copper-gold porphyry intersecting wide mineralization below the Copler pit. This is just another emerging example of the significant and material growth potential within the business. In Marigold and Seabee and across the broader portfolio, we have a number of organic growth and exploration opportunities we expect to highlight as the year progresses. We remain focused on sustaining and growing our business with a goal to demonstrate our organic ability to sustain production of 700,000 to 800,000 gold equivalent ounces for the next five-plus years. On this note, we are planning to provide a longer-dated production guidance to the market later in 2021. Building from our fundamentally strong business, we have an exciting platform to firmly establish SSR as a premier mid-tier gold producer in the sector, and our fourth quarter results clearly demonstrate the strength of the business. So turning on to the next slide. ESG has always been ingrained in the culture of SSR Mining.

Going forward, we'll continue to do the right things and be recognized as a true partner with our employees and the communities where we operate. We are compiling our 2020 sustainability report and look forward to providing an update on our progress as well as a discussion on our 2021 priorities. From a safety perspective, we hold ourselves in a high standard and have many examples of best practices across our business. I'll take a minute to recognize two achievements in the quarter. Firstly, I congratulate the Copler team on being awarded the 2020 SME Health and Safety Operational Excellence Award, which is truly a great achievement for the site. And at Seabee, the team was successful in many of the new diesel particulate matter regulations of the province with the recently installed ventilation upgrades. This means that's it's no longer mandatory to wear respirators in the underground, which is an excellent outcome for all. We're proud of our achievements and we'll continue to be progressive in our approach to ESG moving forward. Just looking ahead at our 2020 outlook, our guidance represents an overall improvement relative to our 2020 performance. Our focus for the year is to ensure safe production, and we have several initiatives being implemented to continue to improve our overall safety results.

We expect to generate peer-leading free cash flow while prudently investing in high-return growth opportunities across the substantial asset base that we have. Some examples of our growth initiatives include the flotation circuit construction and ramp-up at Copler, ongoing cost and continuous improvement initiatives at Marigold, a focus on increasing underground development rates allowing us to utilize latent mill capacity at Seabee in the future and the transition to owner-operated haulage fleet at Puna. On the exploration side, we are investing $65 million across the portfolio and expect these efforts will take center stage as we advance the exploration targets and provide some clarity on their scale and timelines during this year. In this regard, there are a few areas you should pay attention to in 2021. C2 and Ardich at Copler, New Millennium and Trenton Canyon targets at Marigold and the Santoy Gap Hanging Wall at Seabee. Stu will touch on these later in the call. I just want to highlight a few quarterly highlights before I turn the call over to Greg and Stu to dive into the detail.

Operationally, we had a very strong fourth quarter with all four of our operating assets exiting the year with momentum and confidence moving into '21. Our consolidated gold equivalent production totaled 220,000 ounces at an all-in sustaining cost of $976 per ounce. Marigold set a number of operational records while Copler, Seabee and Puna all contributed to the strong results. From a financial perspective, we reported an adjusted EPS of $0.50 a share and generated $157 million in free cash flow in the fourth quarter, ending the year in an excellent position with consolidated cash of nearly $900 million and net cash of $457 million. These results would have been even stronger if our sales had not lagged production due to the timing of gold pours and concentrate shipments at year-end.

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

Thank you. As outlined by Rod, a fantastic final quarter for SSR Mining with our assets integrated and all operations delivering. We posted impressive financial results, which demonstrate the new strength and scale of our business model. While COVID continues to impact on costs and efficiencies, it did not stop our mines from achieving revised guidance. With annual numbers being a blend of pre- and post-merger results, I'll focus my comments on the fourth quarter. Revenue for the quarter increased 65% to $371 million as compared to $225 million in the previous quarter, as we benefited from Copler's contribution for the full quarter, combined with sequential improvements at all four assets. Income from mine operations increased 76% quarter-on-quarter to $146.5 million, and net income effectively quadrupled from nine -- to $98 million from $25 million in the third quarter. Adjusted net income increased 61% to $109 million or $0.50 per share in this quarter from $68 million in the third quarter. So strong financial momentum across all metrics as SSR resets into a new higher scale peer space. Perhaps the only blemish on the quarter was our results would have been even stronger if ounces sold would have equal ounces produced.

Timing of gold pours at year-end drove higher carryover of finished goods inventory at our gold assets. And for those of you familiar with the concentrate market, which is how our silver gets sold, you understand the normal lags from restarting concentrate shipments post COVID closures. Our concentrates in Argentina are generally smeltered in Europe or Asia, so shipment cycles are long. Shipments were back to steady state in November and as a bit of a bonus, we're selling our concentrates into stronger silver prices to this point in Q1. As I noted on our third quarter call, amortization of fair value adjustments related to acquisition accounting for Alacer will be an ongoing impact to reported income. These items totaled $28 million in the quarter and $49 million for the full year and are identified in our adjusted income table. Also through the fourth quarter, while all less than the third quarter, COVID costs, care and maintenance costs and transaction and integration costs all impacted reported income. Cash generation in the quarter was outstanding. Cash from operations in the fourth quarter increased five-fold relative to the third quarter to $217 million.

We generated $157 million in free cash flow, even while sustaining capital investments increased as the sites return to steady state operations. Our net increase in cash was $127 million considering debt repayments. These strong results support our inaugural quarterly dividend of $0.05 per share announced today. The maturing of SSR to a business that can sustain and grow a quarterly dividend has been a goal of mine since I joined the company. So it is satisfying to see this achievement. As we discussed last quarter, our dividend framework of considering incremental shareholder returns above our base dividend from excess free cash flow provides opportunity to further consider these issues as we wrap our arms around the combined business. Our balance sheet is in exceptional shape with $897 million of consolidated cash and $457 million of net cash. We will continue to manage our capital structure in a responsible manner to ensure the ability to efficiently fund and grow our asset base. Our outlook for 2021 as published earlier in the quarter puts us in a good position to continue our strong financial performance and free cash flow generation. Capital intensity remains well-managed as we grow to over 700,000 equivalent ounces.

In our outlook, we noted cash flow weighted to the second half of 2021, recognizing the production profile, particularly as the flotation circuit at Copler starts, but also our sustaining and growth capital profile, which is heavier in the first half of the year. Looking specifically at the first quarter, these cash flow effects are amplified as our working capital build is loaded toward Q1 due to the Seabee ice road restocking and an expected build in receivables as we return to steady state concentrate sales. The first quarter also sees a concentration of cash tax payments. With Copler's strong 2020 performance, we paid intercompany dividends in January, which results in a joint venture partner distribution in the quarter. And as announced, we will recognize our first dividend payment in Q1.

So overall, expecting a great 2021 within those first half/second half variations. With those comments, I'll turn the call over to Stu.

Stewart Beckman -- Executive Vice President, Chief Operating Officer

Thanks, Greg. Before we move into the mine site summaries, as always, I'll start with EHS&S, environment, health, safety and sustainability. Although COVID remains pervasive, we are managing it at our sites, caring for our people and getting on with business. Marigold and Copler didn't suffer shutdowns due to the pandemic, and both Seabee and Puna have bounced back to full production. Our COVID protocols focus first on protecting our people, contractors and the communities in which we work. As part of the merger integration, we reviewed our ESG policies, which were updated and approved by the new board. The alignment and updating of EHS&S standards followed and will be completed by the end of the quarter. This forms the foundation of our EHS&S management system, ensuring both efficiency and execution, and that we have a high standard across the business. I was delighted and very proud that our Turkish business unit, Anagold, was awarded the 2020 SME Health and Safety Operational Excellence Award by SME. The award recognized the achievement of over 22 million hours LTI free during the transformation of that business with the construction and commissioning of the $750 million sulfide plant. Copler is currently more than 500 days and approaching seven million hours LTI free.

Not to be outdone, Marigold was also awarded the 2020 Nevada Mining Association Safety Award for Large Operations, which was a well-deserved recognition of the Marigold team. The new SSR sustainability report is in drafting, and we plan to release this with our annual filings at the end of this quarter. Leveraging best practice across the business is the core of our integration process. In the sustainability report, we will reconfirm our commitment to our communities and the environment, along with continuous improvement in reporting, with disclosure starting to the CDP and TCFD planned later this year. We have a well-resourced and experienced HSE and operations teams within SSR. Now please move to Slide eight for some commentary on each of the sites. 2020 was another really big year for the Copler operations. Despite the challenges of COVID, the team managed to deliver within guidance, 327,000 ounces at $752 an ounce. There were some indirect COVID impacts, including production and the pushing back of some working costs into this year. Despite the challenges of 2020, the sulfide plant continues to perform at the higher end of expectation and is now consistently operating well above design throughput. The autoclaves achieved an impressive 92.5% operating time in 2020.

Copler demonstrated, again, it is truly a world-class operation and district with solid performance and outstanding development pathways. In Q4, we released the 2020 Copler District Master Plan technical report, or the CDMP 2020 as we call it. This is the next step in the development of the district, included a supplemental flotation circuit in the base case, which significantly increases throughput rates and an alternate PEA case for the development of the near-mine Ardich deposit. The Board have approved the construction of the flotation plant, which is on track for commissioning mid this year. Key takeaways from the CDP -- CDMP 2020 were: the base or the mineral reserve case, which incorporates the supplemental flotation circuit, increased processing rates, lowered costs, significantly increased reserves and resources, extended the mine life and delivered an NPV of $1.7 billion at a 5% discount rate. The life of mine gold production for the reserve case is 3.6 million ounces. The second scenario included an alternative PEA case, which had the development of the Ardich deposit. Ardich is located six kilometers northeast of the Copler processing facilities where it's -- all will be treated. The NPV for the PEA case was $2.2 billion at 5% discount rate, and the life of mine gold production was 4.6 million ounces with plenty of upside. There are 175 holes drilled into Ardich that contributed to CDMP 2020. Since those first holes, we've drilled another 130 holes, and exploration and infill drilling is going on as we speak.

Excitingly, in the last half of 2020, we discovered a copper-gold porphyry directly under the main pit in Copler mine. On the 25th of November, we made an exploration release for the first four holes. Creatively, we designated the target C2. I'll talk more about C2 later on. Please jump to slide nine, and we'll talk about Marigold. Marigold operated through 2020 without a COVID stoppage due to excellent work and effort by the management team. They didn't just keep the mine operating, they broke records for annual production in 2020, along with quarterly and monthly production records in Q4, producing 77,000 ounces in the quarter. The Q4 production benefited from ore being stacked on to lower lifts of the leach pads. Record material movements were also achieved in 2020, and we expect these records will be beaten again in 2021. In Q4, issues with the new hydraulic shovels were largely resolved, and we're off to a good start in 2021. The expanded fleet, improving performance and shorter hauls are supporting the higher tonnage rates in the mine. The head grade crept up in the fourth quarter, higher than previous quarters, as ore was extracted from Mackay four and Mackay 8. All-in sustaining costs for 2020 were $1,222 an ounce, and they were impacted by increase in royalties as a result of gold price as it did at all of our sites. Exploration drilling continued across the property with some interesting results. Marigold has very large land package from acquisitions over the last few years.

This provides lots of opportunities to discover and develop low-cost near-mine resources by leveraging off our know-how and our infrastructure. I'll talk a little bit more about Marigold Exploration later. Please move to Slide 10. We see real potential in Seabee, above what's been a pretty consistent performance over recent years, apart from the COVID impact, of course. On EHS&S front, Rod has already mentioned Seabee's achievement in lowering the diesel particulate matter and improving the working conditions of our folks. Seabee continues to manage COVID, with some cases presenting on site. While this has created difficulties for operations, they're carefully and safely managing it. Seabee ramped the back-up in August and in September, had a record month, milling, on average, 1,271 tonnes a day. In Q4, the mill caught up with the mine, and the average mill throughput rate was 1,081 tonne per day, which is consistent with our PEA case, which was released in 2017, predicting 1,050 tonnes per day for the life of mine. The processing plant clearly has capacity, and the mine is the bottleneck. Continuous improvement opportunities in the mine are being pursued, including some replacement and extra equipment, which is scheduled to come across the ice road in the next few weeks.

Additionally, we're putting a lot of effort into resource and reserve definition in the mine along with increased exploration, targeting extensions to mineralization on strike in our very large tenement package and the contiguous Fisher JV areas. Within the mine in Q4, we did more than eight kilometers of drilling in the Santoy Hanging Wall target, which is adjacent to the existing mine infrastructure. This will be a focus for the resource development team in 2021. And we're expecting that it will be the next development opportunity behind the Gap Hanging Wall. We're developing a second sell into the Gap Hanging Wall, aiming to convert a significant portion of the Gap Hanging Wall resources into reserve by the end of 2021. Please move to Slide 11. Puna has ramped back after the hiatus for COVID and it has had a great run at the end of the year. Throughput rates averaged just over 4,500 tonnes per day, delivering 2.2 million ounces of silver in Q4. Overall, 2020 produced 5.6 million ounces of silver and exceeded our updated guidance. AISC was $15.22 an ounce for silver. And as Greg mentioned, the AISC was impacted by the delayed silver concentrate sales.

The team at Puna are very focused on continuous improvement and cost control. At the end of this quarter, we transitioned to owner haulage from the mine for the 40-kilometer trip to the processing plant. Coming out of commissioning and the COVID shock, Puna has stabilized really well and is consistently delivering. Now please move to Slide 12. I've already covered off a lot of this already, but I'm going to take a couple of minutes to help frame it the way we see the portfolio from an exploration perspective. First of all, it's a fantastic portfolio, rich with brownfield near-mine targets, which present opportunities for low cost capital, near-mine and in mine development. In Seabee, we have known mineralization that, if developed, could leverage off the fact that the processing plant has a much higher capacity than the current mine configuration can deliver. Marigold has potential to achieve one of a number of value-accretive outcomes. First, an increase in head grade and resources from near mine, which would then be processed in the current heap leach pad areas. We are focused on increasing the grade, and believe that there is good probability of a successful outcome, especially in the areas of butting the historical pits. Recent tenure acquisitions have really boosted this prospect. Secondly, expanding and developing the resources of the recently purchased Trenton Canyon and Buffalo Valleys.

And finally, the discovery of an economic sulfide ore body, similar to other mines in our district, is a tantalizing target, which we have reason to believe there's a real possibility. Finally, but not last, is Copler. Copler has a plethora of opportunities that can take advantage of the processing complex, which has the capacity to treat both oxide and sulfide ores. The development of Cakmaktepe mine in recent years is a great example of our ability to execute this strategy. Ardich is the most advanced project with a target to deliver ore to the Copler processing facility in 2023. As I mentioned earlier, developing Ardich is expected to add at least one million ounces of gold to the production of Copler. Our newest discovery is C2, which also has the potential of significant value. Please move to Slide 13, and I'll give you a brief update of where we are with C2. C2 was discovered in the last half of 2020, and we released the exploration data for the first four holes. The best intercept was a bit over 240 meters at 0.74% copper equivalent, starting from just 37 meters and included grades -- no, included zones where the grades were well over 1%. Those holes were composited for lithology and sent to Canada for metallurgical testing, where we are encouraged by the preliminary results. The first round of met testing will be completed in the next weeks and the data analysis before the end of the quarter.

In the center of this slide, you can see a photo of the chalcopyrite froth from the lab testing of the C2 ore. There's really good reason to be excited by C2. It seems to have grade and there is good potential for volume. There are higher grades near the surface. The mineralization starts practically in the final bottom of the existing pit, which you can see from the cross sections at the bottom of the slide. Copler is blessed with great infrastructure. And importantly, we've recently demonstrated that we can deliver a major project in an area. There is a lot of work to do to turn C2 into a project, and we're running hard at it. We have nine drills in C2 at the moment and are advancing our thinking and preparation for a development study. You should hear more about C2 in the future.

Thank you very much, and back to Rod.

Rodney P. Antal -- President And Chief Executive Officer

Well, thanks, Stu, and thanks, Greg. So despite the challenges thrown at us by COVID, our team have done a tremendous job managing our operations, completing the merger and integration, all while finishing the year with exceptionally strong fourth quarter performance. We declared our inaugural dividend this morning which highlights the financial strength of our new business and a responsible approach to capital allocation. We will assess the potential for further capital returns to our shareholders, in line with our capital allocation policy with our quarter one 2020 financial results. In '21, we remain focused on creating value for our shareholders, safety and execution while progressing the many organic high-value growth options that we have been highlighted during this presentation.

So with that, I'll pass the line to the operator to take any questions you may have.

Questions and Answers:

Operator

Operator: [Operator Instructions] Our first question comes from Ovais Habib of Scotiabank. Please go ahead.

Ovais Habib -- Scotiabank -- Analyst

Hi, Rod.just the first question, again, you've touched on asset allocation quite a bit and talked about share buybacks. And is there obviously, your balance sheet is extremely strong. You're going to be generating a lot of good free cash flow in 2021. And your free cash flow profile is second half weighted. Is this kind of what you're looking to get over in terms of announcing any sort of a share buyback program? Or is there any other plans in place?

Rodney P. Antal -- President And Chief Executive Officer

Thanks, Ovais, and look, I'll answer the question in a slightly long version because I think it's important. The capital allocation, that policy that we established toward the end of last year, was really in three prongs. And the first part was to maintain and strengthen the balance sheet to ensure we continue with our debt management and other needs of the business. Keeping an eye to the future and some of the exciting growth prospects that we have emerging in the portfolio, in particular, more recently, we want to be able to maintain that strength in that balance sheet to allow us to grow from within our means. So that's really important to us. And then obviously, the last piece is returning excess cash to shareholders.

So the base dividend that kicked it off this morning is the first step in that direction. And that's something that we feel very confident that can sustain through any cycle. And so we're really, really, really pleased to get that behind us. And then obviously, with the year now already in '21, once we complete our quarter one financial results or in conjunction with those quarter one financial results, we'll start doing the assessment of either supplementing those base dividends with another dividend and/or the share buyback. So it's not too far down the road here, Ovais.

Ovais Habib -- Scotiabank -- Analyst

Rod, just getting antsy here, I guess. Just moving on to exploration. Definitely focus seems to be near-mine organic opportunities. I mean you're looking at Copler, Marigold as well as Seabee. What are your plans on Pitarilla and San Luis? I mean, are those assets becoming a little bit noncore or just will remain part of the portfolio? And then once you do kind of go through your three main assets, then you'll start looking at those assets as the next -- in the organic pipeline?

Rodney P. Antal -- President And Chief Executive Officer

Yes. Look, no, Ovais, we haven't made any determinations about core and non-core in the portfolio at this stage where -- we will go through the process, and we'll continue to do it as normal course business for us to ensure that we always have a view to managing the portfolio because you can easily get in the bad habit of not doing that and being ruthless and rigorous in those approach. It's still status quo in terms of San Luis and Pitarilla, in particular, in your question, and we'll continue to look at those during 2021. And then you have Puna. Puna, to us, is always -- is another question that comes up quite a lot. It's a great little cash flow generator. And particularly with silver prices where they are today, we see that continuing. And this year, we are going to put some money into investing at looking at some of the exploration potential around Puna as well to see what else might exist there. So at this stage, it's a bit of a holding pattern of those and really important that we understand the full value of the portfolio. And as time goes on, obviously, those questions will become more front of mind for us.

Ovais Habib -- Scotiabank -- Analyst

Perfect, Rod. Thanks so much, and again, thanks for taking my questions.

Operator

And our next question comes from Cosmos Chiu of CIBC. Please go ahead.

Cosmos Chiu -- CIBC -- Analyst

Hi. Thanks, Rod and team for the conference call, and great to see that you've put in a inaugural dividend here. Maybe my first question is on reserves and resources, Rod. Great to see that you've put in the technical report late last year on Copler, updating the reserve and resources there. But how about the other deposits in terms of Marigold and Seabee, Santoy. When would we -- should we be expecting in terms of reserve resource update? And on a go-forward basis, should we expect it on an annual basis in terms of reserve resource updates at the various deposits?

Stewart Beckman -- Executive Vice President, Chief Operating Officer

Yes. Cosmos, it's Stewart here. So we used to do this differentially. Alacer used to do it annually, and with the AI, and that's what we're going to do going forward. So you'll see those come out. They're prepared, ready to go. We're just finalizing them and ticking and tying them at the moment. So you'll get to see those with the filings at the end of the year -- or the year-end filings, I should say.

Cosmos Chiu -- CIBC -- Analyst

Okay. So it should be coming out fairly soon within the month.

Stewart Beckman -- Executive Vice President, Chief Operating Officer

And we'll do that regularly in March.

Cosmos Chiu -- CIBC -- Analyst

Okay. Sounds good. And then I guess my next question is, in terms of C2, great to see that you've made a discovery here. But maybe it's too early right now, but I'm just trying to figure out how this kind of fits in. You put out the technical report, the Copler master plan late last year. Clearly, C2 is not in it yet. But how does it sort of kind of fit in? And clearly, it's a bit different. You're getting down to the porphyry now compared to more the epithermal deposit up at the top. And so it sounds like to me, you're going to have to put in some infrastructure. However, Stu, as you said, there's already some infrastructure in place. Could you kind of help me in terms of trying to piece it together, how this kind of fits in and potentially could fit in based on what you know today?

Rodney P. Antal -- President And Chief Executive Officer

So Cos, I think the -- I'll just make a point and I'll let Stu also contribute on this question in particular. The tech report that we put out for Copler last year, we're very clear that it was really just the start for that asset in terms of daylighting the full value and the full potential of it. Remember, we did -- still have constraints around the drilling around Ardich, and so there'll be more to come. We have a number of other targets that we'll pursue around the Copler site and also within the Copler pit. So it really was just the beginning of the new story for Copler. And then obviously, on the back side of that, we discovered the C2 as well. So my view is I'm agnostic to discoveries in terms of whether it's a gold-copper porphyry or whether it's a gold discovery only because of time grade. And that's the best bang for the buck and the best value for our shareholders, but it's definitely exciting, Stewart?

Stewart Beckman -- Executive Vice President, Chief Operating Officer

Yes. So maybe I could just help you how to think about it. So the porphyry deposit, we should -- we're thinking about that as potentially a stand-alone porphyry, which would carry its own infrastructure. So a typical concentrator. And that's the test work that we are currently undertaking. That said, if -- as we do the capex, we would expect to pick up more of the epithermal and the contact at each of the contacts, the gold. We also have the areas that look like they might be very high gold and lower in copper, which may be suitable for the sulfide plant going forward. And one of the things that we have been looking at in the laboratory is, whether or not after we make the typical copper concentrate, whether there is any opportunity for us to recover more of the gold into a pyrite concentrate. So in typical Copler fashion, we've got lots of opportunities. But if you look at the grade of the first holes that we pulled out, the length of those and where they sit and the strike length, if we can get enough volume in the bottom of the pit into the porphyry, it will stand well against other porphyry discoveries in the world.

Cosmos Chiu -- CIBC -- Analyst

Great. And then as you mentioned, Stu, on the grade, the drill intercepts that you've put out, they are on a copper equivalent basis. Could you remind me what's the split here between copper and gold? And has it really -- the economics behind here, is it really copper driven?

Stewart Beckman -- Executive Vice President, Chief Operating Officer

It's gold driven. It's about 2/3 gold in value at this stage for the first four hauls that we saw.

Cosmos Chiu -- CIBC -- Analyst

Okay. I'm just wondering because, I guess, so why do you put it out as a copper equivalent grade?

Stewart Beckman -- Executive Vice President, Chief Operating Officer

Because that's typically how people look at porphyries. So trying to just help people understand it, to be able to rate it against other porphyries.

Cosmos Chiu -- CIBC -- Analyst

Got you. Okay.

Stewart Beckman -- Executive Vice President, Chief Operating Officer

And then the other thing with a copper -- with a porphyry, they tend to be larger volume, lower grades. So the development of a porphyry would generally mean a larger throughput concentrator rather than sort of the higher grade lower tonnes that you see feeding the current Copler facility.

Cosmos Chiu -- CIBC -- Analyst

Got you. Maybe my last question is on the 2021 catalyst. As you mentioned, at Marigold, you're looking at ongoing cost reduction, continuous improvement initiatives. Could you maybe expand on that? I guess in the past, SSR Mining had talked about equipment in replacement at Marigold. Is that something that's being considered? Grade control drilling enhancements, is that something that's being considered? I'm just trying to get a better sense in terms of how you're going to get about getting to that continuous improvement at Marigold?

Stewart Beckman -- Executive Vice President, Chief Operating Officer

Yes. So we've obviously got quite a program of fleet replacement at Marigold going on at the moment. So the PC7000 have really started to hit their straps. This year, when we did the original path of the plan, the plan was showing the biggest movements that we would ever have seen in the pit. And as part of our caution was we capped the throughput rate based on the fact that we thought we might see congestion. And we think there's a real opportunity to start to apply some higher level control over the top of the dispatch. And we're doing some work. We've done some work. We've actually got operating within Copler, within the plant, some AI and there's some advances in similar technology for pit control. So the guys are starting to look at those types of -- that type of work as well as the other type of continuous improvement that we're always working on.

So as part of the merger, we're going through a process of just rejigging that hole improvement space. And we've really broken into two parts. One is continuous improvement, which is doing good business, doing better at what we do every day, Lean Six Sigma and these programs. The second part we're doing is how can we get step-change improvement into the business, leveraging off some of this new technology at sort of low-cost and to get it into place quickly. So we're not looking immediately to automate the fleet, but how can we use AI to help us to manage and plan better and allocate resources better.

Rodney P. Antal -- President And Chief Executive Officer

And you remember, Cos, at Marigold, increments are really meaningful. So some of the work programs, we'll obviously talk about as they get through further advancement this year.

Stewart Beckman -- Executive Vice President, Chief Operating Officer

Yes. We've been busy reaching out to all of our network to see how we can advance this. And I have to say, the Marigold team, a pretty impressive team and always looking for and hungry for these opportunities.

Cosmos Chiu -- CIBC -- Analyst

Yes. I concur. I was there three years ago, and I was quite impressed by the team out there at Marigold. Maybe my last question here, again, on the 2021 catalyst. At Seabee, you mentioned you're looking to increase the mining rates to exploit a latent mill capacity here. Again, could you help me understand, elaborate on what you try to do at Seabee Santoy?

Rodney P. Antal -- President And Chief Executive Officer

Yes. So in the first instance, there's been a continuous improvement program, and increasing lateral development is required at Seabee. Some of that was required just to keep the continued go-forward plan. And then we're also looking to that. So we've got a couple of jumbos coming in. The same type of things that I was talking about doing at Marigold, we're looking to implement at Seabee going forward. This year will be stabilization, getting the lateral development rates up. And I have to say, implementing sort of continuous improvement work, they did well at the end of last year and sort of started to move consistently at rates that they hadn't moved at before. At the beginning of this year, they're slightly ahead of what the plan has in place for us for lateral move -- lateral rates. So that's sort of -- again, that's the foundational continuous improvement piece. The other piece that we're doing is a little bit longer lived. Everybody believes that Seabee is a project that sort of always has four or five years life in front of it, and will have four or five years right in front of it for the next 20 or 30 or 40 years, however long we manage to continue to develop the next tranche and bring it on.

The question has to be if we put a bit more focus and effort and money into exploration, and we can lift our time horizon a little bit, will we be able to bring some of that other -- some of the other mineralization forward and invest in building up the mine capacity to be able to at least meet what the mill can do and then maybe fully exploit the resource. So you sort of got the immediate do better at what we're doing and go faster and have with that continuous improvement, some sort of innovation. And then the longer-term piece, lift the horizon and can we change the paradigm for Seabee. There's a lot of work to do to work out whether that's going to be achievable. But we believe that there's a pretty good chance that there's real opportunity.

Cosmos Chiu -- CIBC -- Analyst

Thanks. Thanks for the very thorough answer here and those are all the questions I have. Thanks a lot.

Operator

Our next question comes from Tyler Langton with JPMorgan. Please go ahead.

Tyler Langton -- JPMorgan -- Analyst

Yeah, good afternoon. Thanks for taking my question. I guess, in general, I mean, I guess, oil prices up, diesel prices up. Outside of those, are you seeing sort of just any inflation, whether it's sort of labor, materials equipment that could kind of pressure some of your cost targets for the year? And then I guess a little more specifically with Copler, I guess the flotation circuit is not a huge capex spend. But when you think just of the PEA case and the capex there over the next year or so, any sort of inflationary risks with that?

Rodney P. Antal -- President And Chief Executive Officer

Tyler, it's Rod. I'll let Greg tackle the -- most of that question, actually, if not all.

Gregory J. Martin -- Executive Vice President, Chief Financial Officer

Yes. Sure. Thanks, Tyler. I think we're still seeing cost pressures to be fairly moderated generally from the labor side. Where we're operating, obviously, we're still seeing generally economic conditions not fully rebounded. So we're not seeing significant pressures. As you noted, obviously, commodity prices are trending up. So that is an area that we're monitoring. We're fairly well protected on the diesel side for 2021. We're well hedged at both Marigold and Seabee on that pace. So we do have some protection in on those assets, less so at Puna and at Copler. But it does provide a bit of protection against those pieces. So it's certainly an area we'll be monitoring, but I would say, currently, we're not seeing significant pressures translate through.

Tyler Langton -- JPMorgan -- Analyst

Great. That's helpful. And then in terms of just a follow-up on the capital allocation. I mean, is there -- as you mentioned, you kind of ended the year with close to $900 million of cash. I mean, is there a sort of as you go forward, a minimum level of cash that you want to keep on the balance sheet just to kind of provide support for the various sort of projects and exploration you're looking at?

Rodney P. Antal -- President And Chief Executive Officer

Yes. Look, I think it's a -- we sort of take a more holistic view of what all that means to us, Tyler. But yes, that's definitely part of the objective to ensure we have the balance sheet recognizing we're in a cyclical business. As quickly as things go up, we've seen more recently, prices come off. And ensuring that we have the ability then to self-fund the growth that we have in the pipeline. So that's definitely part of the overall strategy here for us. And obviously, with the -- this current share price weakness, we'll definitely look more closely at using tools available to us like an NCIB program for a share buyback moving into this quarter. So I'm not promising it, but it definitely becomes a key piece of our considerations as we move forward. So it's really just trying to do it all, recognize the strength of the business, recognize the growth potential and recognize the cash flow generation through the cycles. So -- and this will keep obviously evolving. It's new. It's still a new company, and we'll continue to mature our thoughts as we move along.

Tyler Langton -- JPMorgan -- Analyst

Great. Thanks so much.

Operator

Our next question comes from Daniel Morgan with UBS. Please go ahead.

Daniel Morgan -- UBS -- Analyst

Hi, Rod and Tim. Two questions, if I may. Firstly, just on Marigold, can you simplistically talk to when it will hit its sweet spot, i.e., this year, you've got record material movements coming. And I think Greg, correct me if I'm wrong, this year will it still be below reserve grade? So just wondering, when are we going to get that sweet spot where stripping comes off and you get grade at or above reserve grade?

Gregory J. Martin -- Executive Vice President, Chief Financial Officer

Yes. It's not in this year, it's in the next few years. This year, we've got a higher strip ratio. We do get some higher grade at the end of the year when we move to five in to the north. But it's another stripping year.

Daniel Morgan -- UBS -- Analyst

Okay. And at Copler, just wondering if you could elaborate on when are the shutdowns budgeted for this year. I'm just trying to get my quarterly numbers trajectory right. And perhaps if you could also call out if there's any major seasonal or quarterly changes to production this year that are worthy of note.

Stewart Beckman -- Executive Vice President, Chief Operating Officer

Yes. So for this year, the -- we've only got one major shutdown on the autoclaves, and that will be autoclave one, which will happen right at the end of this quarter, the beginning of next quarter. It will be about three weeks. And then other than that, the big drivers to Copler this year, there's -- the grade varies a bit just based on the mine plan. And then the big -- the really big overprint is the commissioning of the flotation plant, which happens in starting -- starting at the beginning of the third quarter.

Rodney P. Antal -- President And Chief Executive Officer

Dan, when we put out our '21 guidance, I'll let Brian or Greg just give you the exact numbers. We actually did note that the production will be back-end weighted for the year for some of the reasons Stu just outlined, but for other reasons and other operations as well. And I think Greg gave a really good overview of how it also translates into cash generation in 2021. So if you look back at those documents and if you need anything else, we can always do it off-line.

Daniel Morgan -- UBS -- Analyst

No, that's perfect. Thanks for your answers.

Operator

Our next question comes from Ryan Thompson of BMO. Please go ahead.

Ryan Thompson -- BMO -- Analyst

Hey, guys. Thanks for the update. I think most of my questions have been asked, but maybe just a couple of housekeeping things for the model. I think Greg mentioned that the dividend to the JV partner was paid in January. Just for the benefit of the, I guess, legacy SSR analysts, what is -- like how should we model that dividend going forward in terms of timing? And then just secondly, just on the sales lag in production, is it safe to assume that a bulk of both the gold and silver that wasn't sold in Q4 is going to hit the Q1 income statement?

Gregory J. Martin -- Executive Vice President, Chief Financial Officer

Yes. Sure. I'll address those, Ryan. I think just first talking about the sales, I mean, we'll see normal variations moderate quarter-on-quarter. It was extreme in the fourth quarter just as really all four assets returned to much higher levels of production relative to Q3. So typically, on a portfolio effect, we won't see that kind of variation nor at Puna, assuming we stay at steady state, which is obviously something we're expecting, we'd see that moderate. So again, you'll see normal variations. But I think as we move toward the end of Q2, we'll be right on track. With regards to the dividend piece, it's really -- that's a question that's really challenging to answer specifically.

A lot of that's going to depend on some of the issues that Stu talked about in terms of the needs of that operation from an investment standpoint, that would dictate how we look at distributions out of that operation going forward. And there's also debt repayments and other things that come out of that operation as part of the debt structure in there. So we'll provide guidance as it's appropriate, but it's something that we can't really give you a formula to determine in any manner.

Ryan Thompson -- BMO -- Analyst

Okay. I appreciate the update, guys. Thanks a lot.

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 -- President And Chief Executive Officer

Well, thanks, operator, and thanks, everyone, for participating today. I look forward to keeping you informed of our progress in 2021 and obviously, recapturing some lost momentum here as we get this year and start to daylight some of the excellent growth potential we have in the portfolio. So with that, good afternoon, good evening and good morning.

Operator

[Operator Closing Remarks]

Duration: 56 minutes

Call participants:

Brian Martin -- Director, Corporate Development And Investor Relations

Rodney P. Antal -- 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 -- Analyst

Tyler Langton -- JPMorgan -- Analyst

Daniel Morgan -- UBS -- Analyst

Ryan Thompson -- BMO -- Analyst

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