What happened
Shares of SSR Mining (SSRM +1.66%), a gold and silver miner with assets in North and South America, catapulted higher by 14% after the company reported its fourth-quarter and year-end production results, and provided its 2018 production guidance. As you can decipher from the move higher, Wall Street was pleased.
So what
For the fourth quarter, SSR Mining delivered attributable gold production of more than 88,000 gold equivalent ounces (GEO), a 14% increase from the sequential third quarter, and produced more than 370,000 GEO in 2017, which marked the sixth consecutive year it exceeded its GEO production guidance.
Image source: Getty Images.
Marigold, the company's flagship gold mine in Nevada, produced 52,768 ounces of gold in the fourth quarter, which was 36% higher than the sequential quarter, and led to 202,240 gold ounces produced for the full year. For those who may not recall, SSR Mining lowered Marigold's expected full-year output by 10,000 ounces in the previous quarter due to lower pumping rates to the leach pads as a result of higher clay content. It would appear, based on Marigold's fourth-quarter production tally, the company is already moving beyond this short-term issue.
The Canadian Seabee mine, which was impacted by forest fires in the prior quarter, achieved record throughput of 970 tons per day during the fourth quarter, and produced 83,998 ounces of gold in 2017, representing its best yield in 27 years of operation.
Annual production also came in higher than expected at the Puna Operations in Argentina, with 6.2 million ounces of silver.
For 2018, SSR Mining expects to produce 340,000 GEO at gold equivalent cash costs of just $715 to $770 an ounce. Marigold should deliver similar results to 2017, with 190,000 to 210,000 ounces of gold production, while Seabee projects to deliver another record year with 85,000 to 92,000 ounces of gold production.
Now what
You might be wondering why SSR Mining is skyrocketing if the company expects a decline of roughly 30,000 GEO year over year. There's a twofold answer to that question.
Image source: Getty Images.
First, the company's San Miguel open-pit mine silver stockpile is just about gone, and the company is working feverishly to get its Chinchillas silver project up and running in Argentina with joint venture partner Golden Arrow. There will be a few quarters in 2018 where silver production will be way down from previous years, and thusly SSR Mining's GEO production will dip. Understandably, though, this is only temporary, and SSR Mining should have strong silver production to complement its Marigold and Seabee mines by 2019.
Second, gold and silver spot prices are at multimonth highs. The first quarter of the year has been strong for precious metals for multiple years now, and 2018 is looking to keep that pattern alive. A weaker U.S. dollar and turbulent cryptocurrency prices have chased investors back into the go-to store of value, gold.
As a long-term shareholder in SSR Mining, I see a bright future ahead for the company. It has over $300 million in net cash, providing plenty of capital to make strategic moves and expand existing mines, and is valued at just 6.5 times its projected 2019 cash flow per share. With a fair valuation, in my opinion, often equating to 10 times cash flow per share, I believe there's plenty of upside still left for SSR Mining.
