Allied Nevada Gold's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Allied Nevada Gold Corp. (ANV)

Q2 2012 Earnings Call

August 8, 2012 11:00 am ET


Tracey Thom – Vice President-Investor Relations

Scott Caldwell – President and Chief Executive Officer

Stephen Jones – Executive Vice President and Chief Financial Officer


Zachary Zolnierz – GMP Securities

Sam Crittenden – RBC Capital Markets

Brian Christie – Desjardins Securities

Steve Butler – Canaccord Genuity

Shawn Campbell – Macquarie Capital Markets

Tara Hassan – National Bank Financial



Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Allied Nevada’s Second Quarter Financial and Operating Results Conference Call. At this time, all participants are in a listen-only mode. Following the presentation we will conduct a question-and-answer session and instructions will be provided at that time. (Operator Instructions) I would like to remind everyone that this conference call is being recorded today, Wednesday, August 8, 2012, at 11 am Eastern Time.

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

Tracey Thom

Thanks very much. Good morning. We appreciate everyone for joining us this morning. On the call today is Scott Caldwell, President and CEO; and Steve Jones, Vice President and CFO, to discuss the Q2 financial and operating results that were released last night after market close. The call will be followed by a Q&A session as was mentioned.

Before we begin, please note that certain statements we may 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, and our second quarter report.

I’ll now turn the call over to, Scott Caldwell.

Scott Caldwell

Thank you, Tracey. Good morning to everybody on the call. Now, let’s be honest, the management’s not real happy with the performance in this quarter. It was disappointing on several metrics. First to me, personally and most importantly we suffered in loss time accidents after over two years of a perfect safety record. It was a minor injury, but still nothing’s more important than the health and safety of any of our ANV employees or stakeholders that are out at site. So we’re very disappointed with that and we’re back on track again on the safety side.

We missed our earnings estimate, our estimates on earnings primarily due to a lack of metal sales. We also had a $3.5 million interest payment associated with the recent debt deal we put together, but again didn’t get the metal produced, didn’t get the metal sold. When I say produced, we weren’t able to sell any carbon.

At the end of quarter, we had over 16,000 ounces of gold on carbon that continues to grow. Our offsite processing that we announced in June, we finally were able to do some operational technical issues, but we finally were able to get 900 ounces sold earlier this month. So, it’s starting to move but much slower than we thought and we’ll talk more about that in a little while on the carbon.

Crusher excavation, one of the thing that hurt us; that is complete, but we moved our mining fleet when we got approval to begin with the crusher and started on that excavation, and there is ore there, and unfortunately the model overestimated recoverable gold by about 15,000 ounces. So, net-net was 15,000 fewer ounces went on the heap over the course of the last three or four months.

On the brighter side, things that are looking good moving forward; environmental performance is excellent and permitting is going phenomenally well. Quite frankly, permitting is outrunning operations in engineering. We have permits to approve to proceed with things that the engineering is lagging behind, so we're really racing with the permitting; so that's going very, very well.

I mentioned the $400 million debt deal and most of you are familiar for that. The cash balance was $577 million at the end of the quarter. And we believe with that associated with our cash flow, we're fully financed to meet our current capital requirements. I'm referring to the mill and the crusher expansion.

Cash costs continue to look good. The new mining equipment comes on line. Our unit costs are declining or trending downward and went down by 15%. So we're very pleased with how that fleets beginning to operate, and it's reflected in our unit cost and our productivities.

The mining equipment fleet right now is essentially for the oxide expansion is all on site. We've got the three large shovels; the Hitachi 5500s and 16 320-haul trucks, and we are focused on advancing all aspects of the expansion to dovetail with the permitting success that we've had.

So mining rate has increased to design levels; 35% more tons being mined in the second quarter than the first quarter, with the final shovel becoming operational. The Lewis pad expansion which was about 3 million square feet is complete and was all being stacked on that and leached and that's been in process during the quarter. Solution flows up to the heap have increased to 8,500 gallons per minute, and so we're really stacking solution now and the grades are increasing to the plant as expected.

Silver production, now continues to see – it impresses me, and it exceeds our expectations, and you see that in ounces of silver sold, ounces of silver produced, and that's again biased downwards because of the carbon columns don't recover a lot of silver, it's about a 1 to 1 ratio in the carbon columns.

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