Allied Nevada Gold Corp. ( ANV)

Q3 2011 Earnings Conference Call

November 7, 2011 11:00 ET


Tracey Thom – Vice President, Investor Relations

Scott Caldwell – President and Chief Executive Officer

Hal Kirby – Vice President and Chief Financial Officer


Tara Hassan – National Bank Financial

Steven Butler – Canaccord Genuity

David Brigham – Brigham & Associates

Sam Crittenden -- RBC Capital Markets

Adam Graf – Dahlman Rose

Ron Stewart – Dundee Securities

Shawn Campbell – Macquarie

Mike Kozak – Cormark Securities



Good morning, ladies and gentlemen and thank you for standing by. Welcome to the Allied Nevada Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct the question-and-answer session with instructions provided. (Operator Instructions) I would like to remind everyone that this conference call is being recorded today, Monday, November 7, 2011 11.00 AM Eastern Time.

I would now turn the conference over to you Tracey Thom, Vice President of Investor Relations. Please go ahead.

Tracey Thom – Vice Presiden t , Investor Relations

Thank you, good morning. Thank you everyone for joining us this morning. On the call today is Scott Caldwell, President and CEO and Hal Kirby, Vice President and CFO will discuss the Q3 earnings and operating results which were issued this morning ahead of market open. The call will be followed by a question-and-answer session.

Before we begin, please note that certain statements we will make during this call may contain forward-looking information. For additional information, I refer listeners to read the cautionary statements regarding forward-looking information contained in our press releases and on our website.

I will now turn the call over to Scott Caldwell.

Scott Caldwell – President and Chief Executive Officer

Thank you, Tracey and good morning to everybody on the call. Thanks for taking time out of your day to listen to us. Third quarter, the company had another quarter in the health, safety, environmental front, no lost-time accidents or significant environmental incidents during the quarter. As a matter of fact, the company has gone two years have had a lost-time accident.

Its outstanding performance is a direct result of the men and women working in the field like I just can’t say enough good things about the performance in that area, especially on the safety front. With this dramatic expansion, we are undergoing all the training we are doing and to have that kind of a safety record is only a credit to Warren and the team out of Hycroft.

Bad news, gold production was lower than expected. I want to stress that the recoveries were as expected. The heap is performing as we thought it would perform. We are seeing slightly better silver recoveries, better silver grades in plant. Gold grade is spot on with the model on areas we have mined. Production was adversely affected really by late equipment deliveries the mining equipment that we talked to early in the year, primarily the shovels, but also a driller too took a while to get commissioned.

And then probably the most recent thing was some effects on the Merrill-Crowe plant that started to happen to us late in September or mid September. Pumps were laid – continued to be laid. They finally are operational now with the pumps are required to get adequate flows upon to the heap for the plant expansion that they were eight weeks late or a couple of months hence the drop in production.

Silver production is far greater than what we had expected. It continues to trend up to effective recovery and silver grade, recovery certainly appears to be a couple of percentage points higher than we thought and silver grade is about 30% better than the model so as it should be. I am not surprised by the silver grade side of things, because a lot of the model up high and the (indiscernible) in particular was not re-drilled for silver assays, historically never assayed for silver.

So, we don’t have a real solid model up high and so we are not surprised by that, but we are surprised, pleasantly surprised by the amount of silver we are making. For the quarter, we sold 4.6 ounces of silver for every ounce of gold and I mean even I can do that math, that’s a nice credit to costs, 30 bucks silver, nearly $150 an ounce. Again I keep telling people what makes this thing work, what makes it work on a heap leach, what makes it work on a milling expansion, its silver, silver, it’s a phenomenal credit to cost now. And once we get the mill built, it becomes a real cash flow generator making 20 plus million ounces a year.

Operating costs continued to look pretty good at $478 per ounce in the quarter. Year-to-date, we are sitting at right at $486 or so. So, certainly we believe that we are going to be within our guidance of $450 to $490 an ounce the upper end of that.

Mining costs are trending down unit costs. As the new mining equipment becomes online, we are starting to see those efficiencies with that large shovel, the tonnage goes up. Our cost per ton is trending downwards. We are starting to see that drop back to where we need as we are able to start to stand down the loaders which are high maintenance costs, high operating costs. Process plant, the costs continued to remain flat. I will remind you that forward-looking stuff we use 100 or fuel oil prices associated with $100 per barrel fuel oil. So, we still look that we are okay with fuel running, West Texas running about 95 or so.

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