Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Flush with cash and armed with a knack for spotting mines producing below their potential, SSR Mining Inc. is on the hunt for more assets.
“We want to continue to grow, no question,” John DeCooman, vice president of strategy and business development, said in an interview Wednesday. “We’ll continue to look for assets” that are ripe for operational improvements or with good exploration potential but short on funding, he said.
Company has extended the life of its Nevada-based Marigold mine to 2028 and forecast output would rise more than 30 percent to 265,000 ounces by 2021.
The Vancouver-based miner, formerly known as Silver Standard Resources, changed its name to reflect its tilt toward gold after acquiring the Marigold mine in Nevada in 2014 and the Seabee mine in Saskatchewan in 2016. At those sites, the company has demonstrated what Macquarie analyst Michael Gray terms a “relentless” ability to extract more value by lowering costs, boosting production and lengthening lifespans.
This week, SSR Mining extended Marigold’s mine life to 2028 and forecast output would rise more than 30 percent to 265,000 ounces by 2021 — that’s two-thirds more than what the site was producing when the company bought it from Goldcorp. Inc. and Barrick Gold Corp.
With its growing pile of cash — $473 million as of March 31 — and one of the strongest balance sheets among intermediate miners, SSR Mining is positioned for “potential disciplined M&A,” Gray said in a recent note.
Any future acquisitions would preferably be in the Americas, said DeCooman. “We would need some sort of exceptional returns in order to justify the risks of going to other jurisdictions.”
SSR Mining expects total annual output to rise by a third to 440,000 ounces of gold equivalent by about 2021, according to DeCooman. The ramp-up coincides with what Credit Suisse Group AG calls a “looming production cliff” in global gold output post-2020.
The stock is up 18 percent this year, making it one of the best performers on the S&P/TSX Materials Index and among the drivers that pushed Canadian stocks to a record high this week, according to data compiled by Bloomberg. An index of large gold producers is down 12 percent this year.
“The fruits of our labor for the last several years is really paying off in spades now,” DeCooman said. “Even in the weaker markets that we have today, we’re getting attention. That hasn’t always been the case but it resonates with folks right now.”
