The shares of silver and gold miner SSR Mining Inc (TSX:SSRM) ended 2017 roughly where they started the year. However, that masks some notable volatility over the 12-month span for a stock that was, at one point, up more than 30%. Those gyrations reflect what was a largely disappointing year operationally for the precious metals miner. And while 2018 is likely to be less than inspiring as well, there's a solid prospect that things will start to look a lot better when 2019 rolls around -- the evidence of which will begin to show up in about six months.
Forget about 2017
Let's get this out of the way right up front: 2017 was not the best year for SSR Mining. While the miner was able to achieve its production goals during the year, its overall production was down notably from 2016.
To put some numbers on that, gold sold out of the company's Marigold mine, by far SSR's largest asset, was down 2% between 2016 and 2017. Gold sold from the SeaBee mine was up nearly 13%, but this mine currently produces less than half as much gold as Marigold. That uptick is a clear positive, but not enough to offset the really big hit from the company's Puna Operations, its third major asset. Silver sold out of this mine fell nearly 50% year over year in 2017.
To be fair, SSR ended 2017 on a strong note production-wise, with notable sequential quarter increases at Marigold and SeaBee. In fact, investors pushed the stock 14% higher when the fourth-quarter production results were released in early 2018. However, that doesn't change the overall feel of 2017, which was dour at best.
A look at 2018 and beyond
The interesting thing is that 2018 isn't likely to be much better production wise for SSR. Right now, the miner is looking for production at its Marigold and SeaBee mines to be flat to slightly higher, which is fine. But results from the Puna Operation are expected to be even weaker in 2018 then they were in 2017. Overall, that suggests another year to forget for SSR in 2018.
That's the bad news. The good news is that SSR Mining has been telling investors for a while that 2017 and 2018 would be down years for production as it builds for the future. For better or worse, everything appears to be going according to plan right now. What you need to watch for is 2019, when production is expected to start picking up again.
But you don't have to wait until 2019 to start seeing the upturn. The big story to watch is the progress the company makes at the Puna operation. It is currently working with 25% partner Golden Arrow Resources to complete the Chinchillas project at this site. Construction should start in early 2018, with first production expected in the second half of the year. This project should allow silver production at Puna to double between 2018 and 2019.
However, you'll want to start paying close attention to Chinchillas in the middle of 2018, because that's when mining results will start to show up. If SSR's expectations prove accurate, the back half the year will look a lot better than the first half. And it will set the stage for improved production results in 2019.
The commodity thing
All of that said, SSR is still selling gold and silver, which are both volatile commodities. Any big commodity price move could quickly change the outlook for 2018 -- in a good way or a bad way. But the fundamental picture won't change much. Last year was tough production-wise, and 2018 is likely to be difficult as well. But the second half of the year should start to provide a glimpse into 2019 as production at Chinchillas gets under way. So, don't write SSR Mining off because of its 2017 performance; it's definitely worth a deeper dive if you are in the market for a precious metals miner.