Reporting production of 370,000 gold equivalent ounces, SSR Mining (SSRM 5.14%), which is in the midst of a transition from a silver-focused explorer to an intermediate precious metals producer, extended its streak of meeting or exceeding initial guidance for the sixth consecutive year in 2017.
In terms of the coming year, management forecasts fiscal 2018 production from the company's three mineral-producing assets of 340,000 gold equivalent ounces at cash costs between $715 and $770 per ounce. But there's much more to the company's operations than these two metrics, so let's dig in deeper to get a better sense of what investors can anticipate in the coming months.
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Checking in on Chinchillas
Having received regulatory approval from the Argentine government in late 2017, SSR Mining intends to begin construction of the Chinchillas Project in the first quarter of 2018 with first ore production expected in the second half of 2018. Chinchillas, a silver-lead-zinc deposit, is located near the Pirquitas mine and falls under the purview of Puna Operations, a joint-venture in which SSR Mining has a 75% stake.
Between Pirquitas and Chinchillas, SSR Mining forecasts silver production of 3 million to 4.4 million ounces in fiscal 2018. When mineral production ramps up, Chinchillas, over an eight-year period, is forecast to contribute annual silver production of 6.1 million ounces, 35.0 million pounds of lead, and 12.3 million pounds of zinc at cash costs of $7.40 per payable ounce of silver sold. SSR Mining has high hopes for the expansion project. According to the results of a pre-feasibility study, Chinchillas is expected to provide a post-tax 29% internal rate of return.
Lastly, investors should be on the lookout for the results of an underground study at Pirquitas during the coming year. According to previous drilling results, the Pirquitas underground has the potential to supply high-grade ore to Chinchillas, thereby increasing the value of the asset.
Going for the gold in the U.S.
Located in Nevada, Marigold is the company's lone gold-producing asset in the United States. The mine, which produced more than 202,000 ounces of gold in fiscal 2017, is expected to perform similarly in the coming year; management estimates gold production of 190,000 ounces to 210,000 ounces.
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This fiscal 2018 gold production estimate -- announced in mid-January -- is consistent with a previously announced forecast for 2018, which management had included in a five-year outlook for Marigold published in 2016.
Benefitting from higher mining rates and expanded leach pad infrastructure, Marigold is expected to have lower cash costs in fiscal 2018: $725 to $775 per payable gold ounce. This is well below what management had guided for in the mine's five-year outlook from 2016. Back then, management had estimated cash costs in 2018 between $830 to $880 per payable ounce.
...and in Canada
Achieving an annual record, the Seabee Gold Operation, comprised of two underground mines and acquired in 2016, produced 84,000 gold ounces in 2017 -- an 8.2% year-over-year increase. Management believes the northern Saskatchewan operation is poised to achieve another annual production record; it forecasts fiscal 2018 gold production of 85,000 ounces to 92,000 ounces. But wait; there's more. Seabee is also expected to glitter thanks to its cost profile. The mine is expected to report cash costs per payable ounce sold of $560 to $610.
In the months ahead, look for SSR Mining to turn its focus to the Santoy mine, where higher mill throughput levels and lower unit costs will compensate for the expected closure of the original Seabee mine in the middle of the year. Additionally, management plants to continue implementing the development and expansion plans identified in a preliminary economic assessment (PEA), which was announced last October.
Investor takeaway
There are several things to look forward to in 2018. Moving forward, investors can assess SSR Mining's success by comparing its results to the above-mentioned guidance. Even farther down the road, investors can see if management succeeds in reducing costs even further. According to the PEA, Seabee could potentially have cash costs of about $548 per ounce gold sold over the life of the mine, and average annual gold production of 100,000 ounces for the period 2018 to 2023.
