Image source: The Motley Fool.
Coeur Mining Inc (CDE -2.38%)
Q1 2019 Earnings Call
May 02, 2019, 11:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning, and welcome to the Coeur Mining First Quarter 2019 Financial Results Conference Call. All participants will be in listen-only mode. (Operator Instructions) Please note, this event is being recorded.
I would like to now turn the conference over to Paul DePartout, Director of Investor Relations. Please go ahead.
Paul DePartout -- Director, Investor Relations
Thank you, and good morning. Welcome to Coeur Mining's first quarter earnings conference call. Our results were released after yesterday's market close and a copy of our press release and the slides for today's call are available on our website. I'd like to remind everyone that our press release slides and some of our comments today include forward-looking statements from which actual results may differ. Please review the cautionary statements included in our press release and presentation, as well as the risk factors described in our recent 10-Q -- excuse me, 2018 10-K.
Now, I'll turn it over to Mitch.
Mitchell J. Krebs -- President and Chief Executive Officer
Thanks, Paul, and good morning, everybody. With me here are Tom Whelan and Terry Smith, along with a handful of other members of the management team. As my quote in the earnings release said, our first quarter results were essentially as expected and reflect a back-weighted year for us in 2019. Each of our five North American based operations are positioned to deliver higher production at lower costs throughout the remainder of the year, and we remain confident in our ability to achieve our full-year production and cost guidance.
On Slide 3 of today's presentation, we list some of the key highlights from the quarter, which include our strong cost performance at each mine relative to our guidance ranges, which sets us up well for the full year as expected production levels rise. Terry will describe in more detail the key initiatives at each operation.
Despite challenging weather conditions, the crusher enhancements at Rochester remain on track, with commissioning activities now under way. We are now seeing progress from our efforts to achieve more stable mill performance at Silvertip. Although, Silvertip has been a drag on the Company's results the past few quarters, we are expecting to see better recovery rates and concentrate grades as mill availability continues to improve, and as we begin to mine and process material with grades more in line with our published reserve. At the same time, the Silvertip team is focusing on accelerating underground development and optimizing operating costs to help us achieve positive operating cash flow.
We also continue to invest in our exploration programs that have been so successful in recent years. Thus far, in 2019, our priorities have been on new targets at Palmarejo on known higher grade structures at Kensington, and on the new Sterling and Crown exploration properties in Southern Nevada, where there is a resurgence of exploration activity taking place around us.
Before handing the call over to Terry, I want to highlight a set of slides, starting on Slide 16, that cover our best-in-class corporate governance profile and our ESG initiatives. Earlier this year, we appointed the former Governor of Nevada, Brian Sandoval to our Board of Directors, and we proactively adopted proxy access to further enhance our corporate governance profile. Also, we have included materials summarizing our commitment to our most important asset, our people. Whether it's the celebration of gender diversity throughout the Company, our commitment to hiring military veterans, or the impact training we provide for our front-line supervisors, we recognize the importance of investing in our people.
And with that, I'll turn it over to Terry.
Terry Smith -- Senior Vice President, Operations
Thanks, Mitch, and good morning, everyone. As Mitch mentioned, we are anticipating strong results in the second half of 2019 from each of our operations. Delivering on these plans is the single most important thing we can do to return the Company to positive free cash flow in 2019.
Slide 5 does a good job of summarizing our first quarter production results and provides a bit more color on the key catalysts for the remainder of the year for each mine. Starting off with Palmarejo, first quarter production was impacted by a change in mine sequencing as we performed maintenance on our cemented rock fill plant. Despite the change in sequencing, production was broadly in line with our expectations and we are confident that we will achieve our full-year production guidance as recoveries improve once we return to mining higher grade stopes. The team advanced underground development towards the nearby La Nacion deposit during the quarter, which is expected to add around 400 tons per day of additional mill feed once ramped up. We are also in the process of constructing a new thickener tank that is expected to improve recoveries for both gold and silver by about 2% and should be completed in the third quarter.
At Rochester, record-setting snowfall in Northern Nevada impacted our first quarter results. This had a disproportionate impact on gold production, given its rapid recovery rates where silver production benefited from residual leaching. We are on budget for placed ounces for the year and are confident that Rochester will achieve its production guidance for both silver and gold. The HPGR unit and secondary crusher are now being commissioned and are expected to increase silver recoveries, allowing for higher crushing rates beginning mid-year. The team did a great job of working through the wet weather to keep the project on schedule and on budget. I'd also like to point out that Slide 8 of today's materials has a nice aerial shot of the new HPGR unit installed at Rochester. I'm looking forward to seeing it start up.
At Kensington, production was ahead of our internal expectations for the quarter, with approximately 10% of the ore feed coming from Jualin with an average grade of 0.41 ounce per ton. The team has done a great job of transitioning their efforts from development to full production at Jualin, with the secondary egress and dewatering infrastructure now established, allowing for long haul stope production in the quarters ahead. Kensington's first quarter costs were slightly high compared to fourth quarter 2018, but remain in line with our full year guidance range. Overall, we expect production from Jualin to increase to approximately 20% of total ounces in the remaining quarters at Kensington, leading to lower unit costs.
At Wharf, we are above target for ounces placed so far in 2019 and we are anticipating stronger quarters ahead as we continue placing higher grade material throughout the rest of the year. It is worth highlighting that since we acquired Wharf in 2015 for $99 million, the operation has generated roughly $140 million of free cash flow, representing a return on investment of approximately 22.5% so far.
And finally, at Silvertip, as we've highlighted on Slide 9, we have consistently seen month-over-month improvements in mill performance, which is leading to higher throughput rates and increased production levels. We've been working to resolve a mass imbalance between the mine and mill, which forced us to mine in areas that were lower grade than what we had budgeted during the first quarter. Going forward, average head grades, recovery rates, and concentrate grades are anticipated to continue trending higher as mill availability improves and higher grade material is processed. Achieving our planned KPIs for these metrics is expected to help us reach positive operating cash flow in the coming months.
We also achieved an important milestone in the quarter by opening up our new camp facility. I know firsthand, having been at Silvertip last week, that our employees appreciate us building more suitable accommodations. I also want to thank all our Silvertip employees for working with us over a long cold winter in Northern British Columbia as we completed this critical project. I am feeling good about the progress taking place. We are on budget for 2019, with a plan to return to positive operating cash flow during the year.
Now, Tom will hit on the financial highlights for the quarter.
Thomas S. Whelan -- Senior Vice President and Chief Financial Officer
Thanks, Terry. So I want to begin by emphasizing our focus on executing our business plan. We run our business over the long term and not quarter to quarter. As Terry highlighted, our confidence level in achieving our operating plan remains high, as we aim for a return to positive free cash flow during 2019.
As you can see on Slide 4, free cash flow during 1Q was approximately negative $39 million, compared to negative $18 million in 4Q 2018. This was driven by lower operating cash flow and higher CapEx, as we continue to invest in key growth projects across our portfolio.
Switching over to liquidity, as highlighted on Slide 11, we ended the quarter with approximately $184 million of liquidity, including $69 million of cash and $115 million of availability under our revolving credit facility. It is worth pointing out that borrowing levels under the revolver were the same at December 31 and March 31. We estimate our 2018 and 2019 EBITDA will be comparative year-over-year. However, given our back-half weighted production profile in 2019, we expect a short-term dip in our last 12 months EBITDA in the first two quarters of 2019. Accordingly, we've amended the terms of our revolving credit facility to allow for additional financial flexibility over the next couple of quarters. As we transition back to positive free cash flow, we will be focused on reducing debt to more comfortable levels. As a reminder, our revolving credit facility matures in 2022 and the senior notes are due in 2024.
With that, I'll hand it back over to Mitch.
Mitchell J. Krebs -- President and Chief Executive Officer
Thanks, Tom. To wrap up, Slide 12 summarizes what we need to deliver on during the balance of 2019 to achieve our objectives and position the Company for sustained free cash flow. The number one thing is sustained consistent mill availability at Silvertip so we can start optimizing the recoveries, concentrate grades, and OpEx to accelerate the transition to positive operating cash flow. The second thing is to complete the installation and commissioning of the new crusher set up at Rochester and begin delivering on the expected benefits of HPGR during the second half. The third thing is to accelerate the mining rates from Jualin to boost Kensington's overall grades and free cash flow. The fourth thing is to deliver on our mine plans at Palmarejo and Wharf, which are both expected to deliver higher production throughout the next three quarters.
And then finally, fifth, keep funding our exploration programs across the Company that have been so successful that can generate meaningful long-term value for our shareholders. As a Company, I hope you can tell that we are all laser-focused on returning to positive free cash flow in 2019. We will continue to pursue a higher standard and execute our strategy from our balanced portfolio of 100% North American precious metals assets.
With that, let's go ahead and open it up for any questions.
Questions and Answers:
Operator
We will now begin the question-and-answer session. (Operator Instructions) The first question comes from Joseph Reagor with ROTH Capital Partners. Please go ahead.
Joseph Reagor -- ROTH Capital Partners -- Analyst
Good morning, guys, and thanks for taking my question.
Mitchell J. Krebs -- President and Chief Executive Officer
Hi, good morning. Yeah.
Joseph Reagor -- ROTH Capital Partners -- Analyst
So just wanted to talk a little bit about production in Q1. I know when you guys spoke on your year-end call, you guys guided to Q1 would be the weakest. I think the degree to which it's the weakest when youfigure out what the next three quarters got to average on a production basis caught us all little off guard. And given that, is there any additional color that you can give us as far as how the next three quarters are going to play out, maybe the degree of discrepancy mine by mine? For like Q2, I know it's not supposed to be as good as the second half, just so we can all have a better idea of that in advance.
Mitchell J. Krebs -- President and Chief Executive Officer
Yeah, I'll start Joe, and I'd go back, I know it's a busy slide, but in the materials, that Slide 5 I think does a good job of flagging where we are at each mine after one quarter, and then what we need to do in the remaining three quarters to get into the guidance ranges that we put out. And as you pointed out, Joe, it's a different story for each mine. Terry, fill in whatever I miss. But we start just with Palmarejo, and clearly the grade on the silver and the recoveries on silver were the main driver there in the first quarter. And as Terry pointed out, as we transition out of where we were mining into higher grade stopes with better recovery characteristics on silver, and with the Nacion production coming on in the second half, those are really the keys that should deliver Palmarejo into the guidance ranges.
Rochester, it's probably a little lower than expected on the gold, just given the weather that we obviously couldn't have predicted as we started the year. And as you can appreciate, that hits the gold faster than it hits the silver. We've, I think, more than made up for that now in terms of what we have placed out on the stage four pad with a higher gold grade in that material. So as that material comes off now, throughout the remainder of the year, that's really going to be the key driver on the gold side. And then, you marry that up then with what we expect HPGR to do on the silver side. And that creates probably the biggest, I don't want to say hockey stick, but compared to the first quarter what Rochester is expected to do throughout the remainder of the year. It's a pretty dramatic rise. So we're very excited about everything we have going on out at Rochester.
Kensington, it's really a great story, driven by Jualin. As we do more mining in Jualin, and it becomes a more -- a bigger portion of the tons that we're processing, that grade kicker will drive unit cost down and cash flow up. We feel really good about where Kensington and it is --it's actually our best-performing mine year-to-date relative to plan. Wharf does have a big step-up from the first quarter to the remaining three quarters. But, again, kind of like Rochester, we feel like the cake is kind of already baked there in terms of what's been put out on the leach pads in terms of what's been mined and at what grade. And that'll come off here as expected and drive those production rates higher.
Obviously, Silvertip is a bit of a different animal given the phase that it's in, in this kind of stabilized and then optimized sequence that we're working our way through, but we're getting much, much closer now to the optimized point and out of the stabilizing phase than we were when we talked to you last. So I think we -- like Terry said, we feel good about where things are moving there. It's obviously we're all wishing it had come along faster than it has, but the important thing is, it is coming along. It is a wonderful ore deposit there, 300 gram silver, 8% zinc, 6% lead. That's a pretty compelling business there waiting to unfold. And so we're excited about reaching that point where we can start to deliver that kind of margin and cash flow from that asset. So I don't know if that extra detail helps, but if not, direct us to a certain asset and we can give you more.
Joseph Reagor -- ROTH Capital Partners -- Analyst
I think that's good for now. Maybe I will follow-up offline. And then maybe one other quick question. With the cash balance, I mean, historically I think you guys have tried to keep your cash balance a little higher than the $70 million or so that you have. Would you guys look to drawdown (technical difficulty) to bring that back up a little bit or is it possible you could look at some asset sales?
Mitchell J. Krebs -- President and Chief Executive Officer
I'll start and then, Tom, you can chime in. I think, obviously we watch our cash carefully. $69 million to me doesn't present a problem in my mind. Tom, you might have a different view. It's really a function of in what direction is the trend. Is it up or down? And as you look into the subsequent quarters here in 2019 and beyond, it's trending in the right direction for all the same reasons that we just went through asset by asset. And then my second priority is our balance sheet inhibiting us or prohibiting us from funding the initiatives that are high return and that deserve and require funding and that's not the case either. So I feel like we're fine on the liquidity. We obviously will continue to monitor it closely. But as long as we execute as we expect to, that cash balance grows throughout the rest of the year. Tom, anything...
Joseph Reagor -- ROTH Capital Partners -- Analyst
Great. Thanks. I will turn it over.
Mitchell J. Krebs -- President and Chief Executive Officer
Thanks, Joe.
Operator
The next question comes from Michael Dudas with Vertical Research Partners. Please go ahead.
Michael Dudas -- Vertical Research Partners -- Analyst
Good morning, everyone.
Mitchell J. Krebs -- President and Chief Executive Officer
Hey, Mike.
Michael Dudas -- Vertical Research Partners -- Analyst
Mitch, I noticed you've put out a invite for a trip up to Silvertip in July. Maybe you could just maybe help us understand kind of from where we were a year ago to -- discuss some of the issues getting in the first quarter, and getting the mill up and running and such? How quickly do we anticipate getting to the levels you anticipate? Any changes in operations or process up there that can give us more confidence levels that that's going to be starting up the hump pretty well later in this year?
Mitchell J. Krebs -- President and Chief Executive Officer
Yes, sure. Good question and probably the top priority here for this team. I'll start and then Terry you can go into more detail. We've come a long way since the last 12 months. Mill availability is improving. I think where our focus has sort of evolved to now is really more on the workforce side, attracting and retaining a qualified stable workforce. That remote location up there where Silvertip is, is a challenge, especially over the winter months to get the right kind of people and to get them to stay there, and do the kind of work that we've required, which has mostly been in the maintenance area and in the process area. And we've seen a lot of repeat failures of things, we've seen some operator error that has driven some of the mill availability issues. And so with training and some continuity, I think that's becoming now a key focus. The pace plant at the back end of the mill is really the key culprit of downtime year-to-date. And I think we've got a good plan there that is moving that in the right direction.
And now the grades, I mean, you can see from the first quarter, grades are not where they need to be. But if you think about it from where they -- where we started the year to where they were just this last month, I think, gold -- sorry, silver grades are up 45%, zinc grades up 41%, and lead grades up like 60% from the beginning of the year. So as we work our way underground back into the areas that we are supposed to be mining in, we're seeing the grade come up. And as long as we can keep that mill running for longer periods of time, so that we can really start to dial in those recovery rates with that higher grade material, that is all sort of this summer's objectives. And with that, we'll see revenue go up to exceed our OpEx and that'll put us in a good position to really then turn into that optimization mode where we can really get after the OpEx and drive those margins higher and that cash flow higher. So, Terry, you want -- anything there I didn't cover?
Terry Smith -- Senior Vice President, Operations
I can add, sure. As we talked about the stabilized, optimized approach, the stabilized really ties to revenues. For me, it's the mill availability, as Mitch was talking about, makes recoveries very difficult to achieve higher recoveries. It's a very small plant, up and down just makes it very difficult for us to achieve good recovery numbers. So we see recoveries improving with better mill availability lately. We also have had a number of different maintenance issues that we feel like we now have our arms around and we're addressing.
We feel pretty good about the mill performance as a byproduct of that. We're mobilizing an underground contractor to site to help us access more higher grade areas and to further supplement good mill throughput in the quarters ahead. And we've got a -- we continue to work on our employee attraction and retention program to get high quality employees that will lead to good maintenance and lead to good operations. And so, that continues to be something that we're working on. So those are some of the areas that we're focused on in terms of kind of improving this trend that you see on Slide 9, continuing it to push it up into the right.
Michael Dudas -- Vertical Research Partners -- Analyst
I appreciate the elaboration. Thank you. And to follow-up with you, Mitch, you are recognizing metrics are going to improve through the rest of the year and cash flows coming back, et cetera, but how you characterize, metal prices have been not great, certainly off to the slow start from the balance sheet cash flow standpoint? How do you assess this metal prices stay flat or declining? Like how -- what kind of adjustment or levers can you tack to maintain the financial flexibility that you have even though we are going to get through this -- the process of expanding and growing the asset base?
Mitchell J. Krebs -- President and Chief Executive Officer
Yeah. No, good question. I think the best strategy there, Mike, is to deliver on schedule and if we can, ahead of schedule on these key initiatives. The faster we see Silvertip get over that hump into -- from stabilized to optimized the sooner we see the impact of HPGR at Rochester, sooner we see those silver recoveries go up at Palmarejo and then Jualin, grade impact at Kensington, it's really in our control whether it's -- whether gold is at $1,250 or $1,350. Those initiatives drive us into strong cash flow under either of those price scenarios. So it's really a forward lean-in kind of approach to the question that you're asking and not necessarily a defensive one, as far as trying to make up adjustments on the fly. It's really head down and deliver.
Michael Dudas -- Vertical Research Partners -- Analyst
Yeah, certainly you have ample liquidity to get through the near term issues. But, yeah, certainly it's been, I'm sure most investors have been frustrated by price action et cetera and valuations in marketplace. But, Mitch, appreciate you sharing those thoughts. Thank you.
Mitchell J. Krebs -- President and Chief Executive Officer
No, thanks, Mike.
Operator
(Operator Instructions) The next question comes from Adam Graf with B. Riley. Please go ahead.
Adam Graf -- B. Riley FBR -- Analyst
Thank you. Thanks for taking my questions. Just a bit of additional follow-up on what you guys have been talking about at the operations, for a little bit of clarification. At Rochester, it looked like it was really tons loaded issue in the first quarter versus -- more versus the gold grades or the gold recoveries. Maybe you can elaborate on that a little bit and what you guys expect in the second quarter, if you guys can get back to a 40,000 ton a day type average load onto the pads.
Mitchell J. Krebs -- President and Chief Executive Officer
Terry, you want to take that?
Terry Smith -- Senior Vice President, Operations
Yeah, sure. Thanks, Mitch. Hey, Adam, how are you doing?
Adam Graf -- B. Riley FBR -- Analyst
Hey, Terry.
Terry Smith -- Senior Vice President, Operations
Yeah. As we talked about, weather was an impact on tons and another variable, as you've been out to Rochester, we have valley fill leach pads. And the edges of the leach pads are where material is close to liner and in the middle of the leach pad when we place material, it's far from the liner. So anything that we place in the middle of the leach pad takes a long time for it to breakthrough, sometimes 8 months to 12 months. So we are sort of a victim of tons and our geographic location on the leach pads in the first quarter at Rochester. The tons that we did place were in a deep area of Stage IV. And so we didn't see a lot of that breakthrough happen yet. So that's a little bit further explanation on that.
Adam Graf -- B. Riley FBR -- Analyst
And then for the rest of the year, what do you think your average stacking -- daily stacking rate is going to be?
Terry Smith -- Senior Vice President, Operations
Most ex-pit upgrades we've been sort of targeting in the 40,000 ton to 50,000 ton range.
Adam Graf -- B. Riley FBR -- Analyst
And will you be back there right at the -- right into the -- at the second quarter?
Terry Smith -- Senior Vice President, Operations
No. So, at the moment, we've shutdown our ex-pit crusher as we're getting into commissioning of all the upgrades that we've been talking about. The plan is to start commissioning towards the end of the month and early June and then we'll begin kind of live commissioning activities through the month of June. So we'll be operating at full capacity in the second half of the year.
Adam Graf -- B. Riley FBR -- Analyst
Thank you. And then just getting back to Silvertip, can you guys give us some idea of your recovery targets by mid-year and by end of year? And I notice that zinc recovery in the quarter sort of is heading in the wrong direction. Maybe you can give us a little color on what's going on there.
Terry Smith -- Senior Vice President, Operations
Yeah, sure. I can help you there, Adam. As I was talking about earlier, with the mill coming up and down, it really has its impact on recoveries and the zinc recovery, in particular, as you point out, is low because we've been trying to generate a good concentrate grade that we can sell into our offtake agreements. So not only has it suffered from this up and down, but it suffers because we're trying to solve for our concentrate grade on the back end of the plan. So it's a -- none of these recoveries that you're seeing at the moment are representative of what we see in the long term. I would point to the best work that we've done is, expressed in the technical report that we issued last year, and in that report, we kind of lay out the recoveries and all the test work that supports those recoveries. So we feel good about -- everything is sort of north of 80% and into the high 80% with lead, I believe. So does that help -- answer your question?
Adam Graf -- B. Riley FBR -- Analyst
I guess, if you have any projections on when you think you're going to -- you can get there. Maybe it's early days. I don't know, but if you have any guesses or plans or maybe things are just too up in the air for you to say?
Terry Smith -- Senior Vice President, Operations
Yeah, I don't think I want to name any numbers, Adam, lest it will be married to them, but it's --
Mitchell J. Krebs -- President and Chief Executive Officer
Mill availability, it's tied to mill availability, right.
Terry Smith -- Senior Vice President, Operations
Exactly like the way I think of it is, as mill availability improves, that's probably a 10% bump in recovery. And then as you get into this optimization phase that we're talking about, there are a number of different incremental things we're working on to improve recoveries after that. So it's probably a step-up and a progression towards the end of the year, just like a function of the mill availability really.
Adam Graf -- B. Riley FBR -- Analyst
And you mentioned in your prior comment something about a contract miner for underground, has that been a bottleneck?
Terry Smith -- Senior Vice President, Operations
Well, it's really a derisking mechanism to get just a kick of development completed, get us into some more ore phases and really just derisk the underground component of being able to feed the mill continuously.
Adam Graf -- B. Riley FBR -- Analyst
Got it. Great. Thank you for taking my questions, guys.
Mitchell J. Krebs -- President and Chief Executive Officer
Thanks, Adam.
Operator
The next question comes from Mark Reichman with Noble Capital Markets. Please go ahead.
Mark Reichman -- Noble Capital Markets -- Analyst
Good morning.
Mitchell J. Krebs -- President and Chief Executive Officer
Hi, Mark.
Mark Reichman -- Noble Capital Markets -- Analyst
How are you today? Just on Silvertip, I was just curious about, you mentioned the workforce, and that was mentioned in the press release. So you've got this new camp that's being built, so that kind of helps out on the facilities there. I'm just curious, what is your turnover there with the workforce and in terms of what percent of staffing are you operating at currently at Silvertip?
Mitchell J. Krebs -- President and Chief Executive Officer
Terry, you want to take that?
Terry Smith -- Senior Vice President, Operations
Sure. Our turnover rate has been very high at Silvertip, and that's pretty typical of start-ups in my experience. Even going back to Kensington back in 2013, we had very high turnover rates that eventually stabilized and it's sort of a --
Mark Reichman -- Noble Capital Markets -- Analyst
So where is it now and what's it average for the last couple of quarters? Is it 50%?
Terry Smith -- Senior Vice President, Operations
Yeah, we're sitting around 40%. It's been as high as 50%, 55%.
Mark Reichman -- Noble Capital Markets -- Analyst
Okay. And so what's the biggest -- I mean, I know it's out in a remote location and I think you'll have this new camp, but in terms of just thinking about the costs of the mine, what does the labor cost? How does that factor in? Do you think increasing the pay is going to go a long ways to reducing the turnover or are there other factors?
Mitchell J. Krebs -- President and Chief Executive Officer
It's Mitchell. I'll start, Terry, you can -- Tom, you guys can fill in or correct me. I think, as a start-up, what we're seeing is, I think a couple of things from my perspective. One is, many of the people we're bringing in are new to mining and that's a two week on, two week off shift up there. And oftentimes after giving that a try, they decide to move on. That's one part of the equation. Another part is, as a start-up, people that are working there get paid a certain base component, and then there is an incentive bonus component. And if that incentive bonus component isn't paying out, and they could find a job somewhere at a more stable mature operation where it is, they can maximize their take-home pay. And I think that's been a driver as well. So we're taking another look at how we've got the compensations set up there, to see if that can be a part of the solution to hold on to the people that we want to hold on to and get a little more consistency and continuity in the workforce there as we move through this phase of stabilization.
Mark Reichman -- Noble Capital Markets -- Analyst
Is there any difference -- not to belabor it, but, I mean, is there any difference between maybe some of your more tenured people that maybe you've relocated from other areas or I guess, are you losing some of your really good people or is most of the turnover just at the newbie level, I guess, or the new employees?
Mitchell J. Krebs -- President and Chief Executive Officer
I think it's fairly broad. I don't think we've been -- our management team has been quite stable, and supervisors have actually been quite stable. But in term -- as you get down into the workforce in terms of seasoned mill rides versus brand new mill rides, I think it's been a bit checkered. I don't think there's any specific trend there as far as that goes.
Mark Reichman -- Noble Capital Markets -- Analyst
Okay. Well, I mean, when you think about the -- I guess, I had kind of focused on the plant availability in terms of Silvertip's some of the unevenness in their performance, I kind of focused on that up until maybe this release. And then I started to think more about the workforce. And I mean, how much of a hindrance has it been? Like, for example, when I look at the financials, you've kind of taken -- you've taken write-downs for the last several quarters attributed to the start-up. And I realized you back those out, but they are due to the plant availability and the lower than expected production levels. And so I was just thinking, with the write-off this quarter, even though Silvertip actually had a pretty strong performance relative to the last quarter, it probably was a little below your expectations. And I'm just wondering how much of the issue relates to this workforce issue or whether you're just more focused on the plant availability and maybe how soon you think you can bring that turnover rate down?
Mitchell J. Krebs -- President and Chief Executive Officer
Yeah, it's a bit of a circular reference there, because the mill availability is, I think, largely going to be driven by the workforce and the quality of the people that are running the plant and maintaining the plant. I think -- the other day I asked Terry the question, Terry to get to a 100% of where we want to get in the mill, how far will the workforce focus get us to a 100% and I think your answer was, that will get us 85% of the way there and then some of these additional incremental projects that we're working on will help get us up from the 85% up to the 100%.
Terry Smith -- Senior Vice President, Operations
That's right.
Mitchell J. Krebs -- President and Chief Executive Officer
So if you sort of extrapolate from that conversation Terry and I had, that suggests it's a pretty big component to getting us to where we need to be. And I think we've got good leadership there, some good accountability. It's a quality group there in terms of the overall team. And I will say, if you -- you'd be shocked, given all these challenges that we've been experiencing, the safety performance there has been remarkably strong which did not go unmentioned or unnoticed. So we're making the progress that I think in terms of relative to budget through the first quarter we are pretty much right on where we thought we'd be there at Silvertip, but now we've got to make the next step up here in the next quarter. Yeah, Terry, go ahead.
Terry Smith -- Senior Vice President, Operations
Yeah, the other aspect. I think, what you're hitting, Mark, is just kind of the foundation of cost that we see there and we've been solving for revenues as I was mentioning earlier and I didn't really talk about operating costs. That's really the second phase of this optimized focus that we're going to have where we just have a lot of contractors on site, we have lot of employees, we have rental equipment, we have got contracts that we are going to be revisiting. So there's just a whole host of really good operating cost reductions that we're going to be focused on later this year. So while we're solving for the revenue side, which is a byproduct of the plants and the people and all the things that we've been talking about, there is a pretty good swath of OpEx that we hope to cut out of the operation in relatively short order.
Mitchell J. Krebs -- President and Chief Executive Officer
Mark, let me take one last crack at your question and maybe this is a better way or a different of way of thinking about it. Right now our OpEx on a monthly basis is running about $8.5 million or so. We need to get that to down to $7 million. And that's going to get -- we're going to get there through a lot of the things Terry just mentioned. And to stop having these mark-to-market adjustments from quarter-to-quarter, we obviously need to get metal sales up to $10 million a month or more. And that is in the plan here for this quarter and for subsequent quarters throughout the year. And obviously if we maintain a $10 million a month revenue rate and we've got $8.5 million of OpEx going down to $7 million, that's the business case for Silvertip and we're getting there.
Mark Reichman -- Noble Capital Markets -- Analyst
I really appreciate that. I think you all did a great job in terms of laying out the catalyst for improved second half performance. So, thank you very much.
Mitchell J. Krebs -- President and Chief Executive Officer
Thanks, Mark. Appreciate the questions.
Operator
This concludes our question-and-answer session. I would like to turn the conference back over to Mitchell Krebs for any closing remarks.
Mitchell J. Krebs -- President and Chief Executive Officer
Okay, well, thanks. We appreciate everyone's time this morning, and we look forward to speaking with you again this summer, to talk about our second quarter results. Have a good day. Thanks, again.
Operator
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Duration: 42 minutes
Call participants:
Paul DePartout -- Director, Investor Relations
Mitchell J. Krebs -- President and Chief Executive Officer
Terry Smith -- Senior Vice President, Operations
Thomas S. Whelan -- Senior Vice President and Chief Financial Officer
Joseph Reagor -- ROTH Capital Partners -- Analyst
Michael Dudas -- Vertical Research Partners -- Analyst
Adam Graf -- B. Riley FBR -- Analyst
Mark Reichman -- Noble Capital Markets -- Analyst
Transcript powered by AlphaStreet
This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.
