CA - Avino Silver & Gold Mines Ltd. (ASM) Q4 and Year-end 2022 Financial Results Conference Call Transcript
2023-03-29 14:29:04 ET
Avino Silver & Gold Mines Ltd. (ASM)
Q4 and Year-end 2022 Financial Results Conference Call
March 29, 2023 11:00 PM ET
Company Participants
Jennifer North - Head of Investor Relations
David Wolfin - President and CEO
Nathan Harte - Chief Financial Officer
Carlos Rodriguez - Chief Operating Officer
Peter Latta - VP, Technical Services
Conference Call Participants
Jake Sekelsky - Alliance Global Partners
Heiko Ihle - H.C. Wainwright
Presentation
Operator
Thank you for standing by. This is the conference operator. Welcome to the Avino Silver & Gold Mines’ Fourth Quarter and Year-end 2022 Financial Results Conference Call and Webcast. As a reminder all participants are in a listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions].
I would now like to turn the conference over to Jennifer North, Head of Investor Relations. Please go ahead.
Jennifer North
Thank you, operator. Good morning, everyone, and welcome to the Avino Silver & Gold Mines Ltd. Q4 and Year-end 2022 Financial Results Conference Call and Webcast.
To join this webcast and conference call, there is a link in our news release dated March 23, which can be found on our website under News 2023. As well, you may find a link under the Investors tab, then click on Events, and you will see the link at the top of the page.
On the call today, we have the Company's President and CEO, David Wolfin; our Chief Financial Officer, Nathan Harte; our Chief Operating Officer, Carlos Rodriguez; and our VP, Technical Services, Peter Latta.
Before we get started, please note that certain statements made today on this call by the management team may include forward-looking information within the meaning of applicable securities laws. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results to be materially different than those expressed by or implied by such forward-looking statements.
The Company does not intend to and does not assume any obligation to update such forward-looking statements or information other than as required by applicable law. For more information, we refer you to our detailed cautionary note in the Q4 Year-end presentation related to this call or on our press release of yesterday's date.
I would like to remind everyone that this conference call is being recorded and will be available for replay later today. Replay information and the presentation slides accompanying this conference call and webcast will be available on the website. Thank you.
I will now turn the call over to Avino's President and CEO, David Wolfin. David?
David Wolfin
Thanks, Jen. Good morning, everyone, and welcome to Avino’s Q4 and year-end 2022 financial results conference call and webcast. Thank you for joining us.
Before we begin, please note that the full financial statements and MD&A are now available on our website. Also please note that all figures are stated in U.S. dollars unless otherwise noted. On today's call, we will cover the highlights of our fourth quarter and year-end 2022 financial and operating performance and the work we are currently performing and then we will open it up for questions.
I will start the presentation with a discussion on operations for Q4 and year-end and then I will turn it over to Nathan Harte, Avino's CFO to discuss the financial performance for Q4 and year-end.
Beginning on Slide 5, we have listed the many milestones Avino achieved in the fourth quarter and for the full year 2022. Starting at the top, we beat internal production estimates for the full year 2022. The Company's internal estimate for production 2022 was between 2.2 million and 2.4 million ounces of silver equivalent and the actual production achieved was 2.6 million ounces of silver equivalent, which is an increase of 215%. Our fourth quarter production also increased 42% compared to Q4 2021.
Next, the Avino Mine underground operations increased for the year through continued ramp up, which led to the throughput increase of 228% to almost 542,000 tons over 2021. The dry-stack tailings facility is now complete. The installation and commissioning of the dry-stack tailings project is completed and the facility is now fully functional. The investment that we have made into the facility demonstrates our commitment to the safety of our people, local communities and the environment.
Next on the list, we have exploration drilling. In 2022, the Company completed over 15,500 metres of drilling, delivering on our promise to reinvest into exploration at Avino. The latest highlights can be viewed in our news release section of our website at avino.com. Then at the Oxide Tailings project, we drilled a further 17 holes, bringing the total number of holes drilled to 127. In 2022, we performed all the remaining recommended drilling from the 2017 preliminary economic assessment. The metallurgical test work has been completed and the upcoming prefeasibility study on the project will commence shortly.
Next, Avino continued to be dedicated to building and maintaining a local workforce. Training programs that have started in 2021 remain ongoing with the Company providing inclusive opportunities.
Next, we continue to digitally transform certain areas of the mine to enhance efficiencies including mill automation and underground vehicle tracking.
Finally, the acquisition of La Preciosa, which closed early in 2022, has set us on a clear path to transformational growth and the goal of becoming Mexico's next intermediate silver producer. On closing of the acquisition, the consolidated mineral resources with the Avino property totaled 290 million silver equivalent ounces.
Since then and subsequent to the year-end, we have released an updated mineral resource estimate, which demonstrated that across all properties we now have over 36 Avino ounces of silver equivalent. This indicates an increase of 38% in measured and indicated silver equivalent ounces and provided us with a strong long-term outlook.
Moving on to Slide 7 and 8, we will show you our Q4 and full year production results. The Avino Mine continued to outperform in the final quarter of 2022, building on our record third quarter production results and by outperforming our expectations to achieve 770,000 silver equivalent ounces. The production came from Avino Mine only and as compared to Q4 2021.
The highlights are as follow. Silver equivalent production increased 42% to 770,000 ounces. Silver production increased by 89% to almost 310,000 ounces. Copper production increased by 37% to 1.5 million pounds. Gold production increased by 12% to 2,426 ounces. And as mentioned earlier, the mill throughput increased by 45% to just over 150,000 tons.
On Slide 7, you will see our full year production numbers, which are compared to the full year 2021 and the highlights are 2.6 million ounces of silver equivalent, an increase of 215%, 985,000 silver ounces, an increase of 302%, 5,778 gold ounces an increase of 71%, 6.4 million pounds of copper representing an increase of 248%. The steady production reflects the quality of Avino's asset as well as the mine site team's ability to continually improve operations.
Turning to Slide 8, I will touch on the exploration program. At the end of Q4, a total of 3,430 metres have been drilled. On our Q3 call we discussed drill results released on October 11, 2022 from six holes at the Avino ET area, which is below the deepest level 17 area of the mine. The results confirm the down dip continuity of widths and grades of the Avino Vein extending to a depth of at least 290 metres down dip.
Moving on to Slide 9. Subsequent to the end of the year and early in Q1 2023, we announced four additional drill holes from below level 17. This drilling shows the Avino Vein to extend a further 315 metres down dip. As a result of this drilling, the Avino Vein is now known to be 800 metres down dip.
On this slide, we show you the long section view and cross section showing the drill hole locations as well as the down dip extension. It also appears that Avino Vein is getting richer in copper as we go deeper with a grade of 1.63% copper over 16.66 metres in Hole #ET 22-12. Further information on the above mentioned results can be viewed on our website under news releases. We encourage you to take a virtual tour of the mine site, which you can find on the homepage of our website for an informative and an in-depth look at operations.
As I previously mentioned, the dry-stack tailings facility now complete and operational. On Slide 10, we show a couple of photos of the dry-stack in operation as well as the conveyor belts transporting the dry-stack tailings to the Avino open pit area. On our website under Investors tab, you will find a secondary tab labeled videos and media where you can view the short videos along with a host of other recently posted items. We've been clear that the dry-stack tailings facility was a top ESG priority and our intention is to demonstrate our commitment to the safety for the community and the environment.
Moving to Slide 11, we've listed our recent ESG initiatives for the final quarter of the year that build on our efforts to incorporate principles of sustainability and social responsibility. Following the restart of operations, it has been the Company's directive to train and hire a local workforce. By providing jobs to those in the surrounding communities we aim to foster generations of enthusiastic and dedicated ambassadors of Avino.
Currently, we have 452 direct jobs at the mine site and offices in Durango, which has increased substantially since the restart and this translates to over 1,200 indirect jobs in and around the area.
After receiving the ESR award in August for the first time, which is granted by the Mexican Center for Philanthropy and the Alliance for Corporate Social Responsibility, we continue to perform the self-directed checklist to ensure we are awarded year-after-year showing our strong support to the local communities and environment.
The list of Q4 initiatives include delivered school supplies to communities in the vicinity of La Preciosa, delivered waterproofing material and paint supplies to the school in Zaragoza for maintenance of ceiling and walls in the classrooms. Street and road maintenance and landfill cleaning was carried out in the communities of Panuco de Coronado, San Jose de Avino and Zaragoza.
We love sport and so do the people of the local communities. Therefore, we regularly maintain the sport areas in the communities. Cleared away brush surrounding the kindergarten in San Jose de Avino, maintain the roads in and out of San Jose de Avino, benefiting ranchers and farmers. Road maintenance was also performed in the section from Zaragoza to Panuco de Coronado, delivered materials needed to maintain the green areas of the community of San Jose de Avino.
Please turn to Slide 12, for metals and mining outlook. During the fourth quarter, we saw continued volatility in markets with rising interest rates and another increase of a quarter point last week. Inflation and the very recent bank failure in the U.S. only time will tell what kind of pressures this will put on precious metals. For the fourth quarter, the silver price was in a range of $18.38 an ounce mid October to a high of $23.94 near the end of December, climbing from the prices seen in the third quarter of 2022.
As many others and I have said before, even in times of economic pressure, the world still needs a steady supply of precious metals. And we all know that silver, copper and gold and a variety of other precious and base metals will be needed in the push for green energy.
In the last few days, the UN Climate Report came out and it have asked all countries to bring forward their net zero plans a decade. So instead of 2050, countries are being asked to commit to net zero by 2040. The demand for metals and precious metals like silver, copper, gold should be even higher.
So we continue to believe that the outlook for silver is positive and that the silver demand will grow in 2023 onwards and we'll be driven by record silver industrial fabrication, increase in green technology and investment demand for physical silver.
I will now ask Nathan Harte, Avino's Chief Financial Officer to present the financial results.
Nathan Harte
Thank you, David. It's my pleasure to be on the call and I would like to welcome everyone who has joined us and is viewing our presentation today.
The fourth quarter represented one of the most meaningful and Avino's 55 year history, as Avino Mine delivered record quarterly revenues $14.6 million bringing the total for the year to an annual record of $44.2 million. These record revenues contributed to net income of $1.3 million for Q4 and $3.1 million for the year. On a per share basis, net income was $0.01 on the quarter and $0.03 on the full year and marks a strong return to profitability.
In 2022, annual cash flow generated from operations including general and administrative expenses was $11.8 million. After capital expenditures, we generated $2.9 million in free cash flow for the year. With the dry-stack tailings facility complete, which represented the major capital project for 2022, we are looking forward to shifting our focus to growth and moving from one single producing asset to becoming a multi asset Mexican producer.
Coming to Slide 14, I will walk you through some key financial results on top of the one discussed in the previous slide. Starting from the top left hand side with our fourth quarter results, we are pleased to report record net revenues of $14.6 million for the quarter. These revenues were derived from 756,000 silver equivalent payable ounces sold, which resulted in reported mine operating income of $4.4 million for the quarter, including non-cash depreciation, depletion and a one-time write down for equipment of $0.3 million. On a cash basis, mine operating income was $5.3 million for the fourth quarter representing a 36% operating margin.
Avino reported net income after taxes of $1.3 million or $0.01 per share for Q4, while EBITDA was $3.2 million for the quarter and adjusted earnings came in at $4 million or 0.03 per share. Cash flow from operations was $3.3 million with the Company spending $2.9 million in capital investment primarily relating to final dry-stack tailings facility payments and new equipment acquisitions.
Now moving over to the full year 2022 column. As noted previously, we recorded a full year record of $44.2 million in net revenues driven by sales of just over 2.4 million silver equivalent payable ounces. These record revenues generated $15 million in mine operating income inclusive of non-cash expenses. On a cash basis, mine operating income was $17.6 million for the year, representing a 39% operating margin. Net income after taxes was $3.1 million or $0.03 per share on the year, again marking a strong return to net profitability for the Company.
On an EBITDA and adjusted earnings basis, which removes certain non-recurring and non-cash items, Avino delivered just over $10 million on both fronts with adjusted earnings per share coming in at $0.08 on the year. Cash flow generated from operations was $11.8 million and positive free cash flow as mentioned, net of all capital expenditures came in at $2.9 million.
Here on slide 15, you can see our cash cost for silver equivalent payable ounce for the fourth quarter came in below the $12 mark at $11.76. For the year, cash cost came in at $10.34 per silver equivalent payable ounce. All in sustaining cash for the fourth quarter were up slightly to $18.63 and averaged out at $17.91 for the full year of 2022.
Throughout the year, we have worked diligently to manage inflationary pressures on a rising cost environment and we look to bring that same mindset into 2023 as we continue through uncertain market conditions all around the world. Controlling costs remain the key priority for Avino in order to not only protect the Company in a down market, but also to outperform when the bull market for metal prices comes to fruition.
Coming to Slide 16, you can see our cash cost per ton processed for the fourth quarter came in a bit elevated compared to the previous quarters at $59.21. For the year, cash cost came in at $46.76 per ton processed. All in sustaining cash cost for the fourth quarter were up slightly at $93.77 per ton processed and averaged out at just over $80 for the full year 2022.
Overall, the increase on a per ton basis is representative of higher ratio of ounces sold when compared to tons processed in the fourth quarter compared to previously planned, primarily due to higher grades resulting in higher sales volumes and slightly lower than planned tons processed.
With Q4 marking another return to profitability, I'm pleased to report that the financial outlook for Avino remains very positive. With record revenues, strong operating margins and cash on hand of $11.2 million, our focus is on our Mexican assets and adding value for our shareholders and stakeholders through 2023 and beyond.
I will now hand it back to, David for a discussion on what Avino has planned for the next year.
David Wolfin
Thank you, Nathan. Please turn to Slide 18 for final remarks. 2022 was a pivotal year for the growth of Avino. We were thrilled to close the acquisition of La Preciosa last March. This acquisition factors in prominently into our growth plan to become an intermediate producer.
In addition, we had two record breaking quarters of production, outperforming market expectations and positioning Avino well for continued growth for 2023. The exploration program was highlighted by encouraging results at the Oxide Tailings project and the extension of the Avino Vein. The dry-stack tailings project was completed and is now in operation.
This was a major capital project with a focus on environmental best practice. This is an important milestone for Avino and the surrounding communities. We are well into the first quarter of 2023. And as I mentioned, we recently announced an updated mineral resource estimate that added significant mineral resources to the total of 368 million silver equivalent ounces across all properties indicating decades of mine life.
Currently, we continued production ramp up at the Avino Mine with mine development work on ET to increase throughput. We have 8,000 metres of drilling planned for 2023 and we are currently have drills turning exclusively on Avino ET below level 17. The metallurgical test work has been completed on the Oxide Tailings project and pre-feasibility study will commence soon. We are also focused on the internal mine plan on the Gloria and Abundancia veins at La Preciosa.
Moving to the last slide. Over the past few months, we've made mention of our clear path to transformational growth. What this means is that, we put together a five-year growth plan that we believe takes us from current production levels of approximately 3 million ounces of silver equivalent to between 8 million and 10 million ounces of silver equivalent by 2028.
We've carefully crafted our initiatives for growth, which are as follows: development, production and optimization of La Preciosa. The tailings project pre-feasibility study and eventual construction decision, further exploration drilling at Avino ET, other exploration on the property. And we've laid out how each year looks with the addition of production from various areas during each year to provide growth. For further information on our clear path, please visit our website and view our corporate presentation.
Finally, we have strong cash management and we remain well positioned to manage through any near-term pressures arising from an overall economic slowdown, while staying focused on our clear path to transformational growth on our way to becoming Mexico's next intermediate producer.
I would now like to move the call to the question-and-answer portion. Operator?
Question-and-Answer Session
Operator
Thank you. We will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from Jake Sekelsky of Alliance Global Partners. Please go ahead.
Jake Sekelsky
Hey, David, Nathan and team. Thanks for taking my questions.
David Wolfin
Hi, Jake.
Jake Sekelsky
So, growth is obviously a top priority over the next few years. And David, you just mentioned you’re on an internal mine plan at La Preciosa. So, do you guys have any color on the timing of La Preciosa tonnage potentially coming into the overall mine plan, and maybe the level of tonnage you're hoping to get to there?
David Wolfin
Starting in the second half of this year, we're planning to start processing the above ground stockpile. There's 50,000 tons there. During this time, we're planning to start the decline ramp. And so, potentially by the end of the year Q1, we could have some fresh ore and the stockpiles in the fresh ore, we're looking at 300 tons to 500 tons per day to start.
We have an idle circuit, Circuit number 2, capable of 250 tons to 300 tons per day that's available to start any time.
Jake Sekelsky
Okay. That's helpful. And then looking a bit longer term there. You have that 250 tons to 300 tons a day in excess capacity now. You've undertaken multiple mill expansions in the past at the Avino Mine, is it the thinking -- kind of undertake additional expansions there to increase overall capacity? Or do you think you might look at building a separate facility for La Preciosa?
David Wolfin
Well, we have an option. I mean, we're depending on how long it takes to develop La Preciosa and also mine ET. Right now, we've got 2,500 tons per day capacity. We may adjust the ore mix overtime. So, we may not have to do an expansion and we are able to increase output really depends on us achieving the 8 million to 10 million in five years.
So, we'll determine that over the next few years if we want to expand the mill further. But there is going to be a major expansion of production facility with the Oxide Tailings project. That's going to be a big project, probably doubling the size of the plant that's there already.
Jake Sekelsky
Okay. That's all for me. Thanks again, guys.
David Wolfin
Thank you.
Nathan Harte
Thanks, Jake.
Operator
[Operator Instructions]. Our next question comes from Heiko Ihle of H.C. Wainwright. Please go ahead.
Heiko Ihle
Hey, good morning, everybody.
David Wolfin
Good morning.
Nathan Harte
Good morning, Heiko.
Heiko Ihle
Just a clarification on the dry-stack. There's really got a learning curve to this, right? In other words, the results you're seeing now are more or less the results we should expect to see going forward all input costs equal rate?
Nathan Harte
Yes. Heiko, I'm not really sure of your question there. But as far as, do we think that we should see any more future cost increases or they're already priced or what do you ask?
Heiko Ihle
Efficiency increases.
Nathan Harte
No, I --
Heiko Ihle
In other words, if it’s -- well, go ahead.
Nathan Harte
No, I mean, as far as what the tailings is capable of processing right now, we're pretty happy with the performance. It's not a bottleneck at all, which is key to the design. So, it's able to handle the full mill throughput and certainly a little additional extra as we planned. And it's kind of processing as we designed. We have the tailings facility where it's being deposited. So, we're pretty happy with the performance of it right now.
Heiko Ihle
Got it. How much has been invested into this thing beginning to now?
Nathan Harte
Nathan, here. Yes, so it's including the conveyor systems to the open pit came in just under $7 million.
Heiko Ihle
Okay, perfect. And then something completely different, you had a lot of talk about ESG earlier on this conference call at the local community. Any idea as to your payroll per month that you handle to the local community and maybe even going on linear, maybe even an idea of how much of the total local economy that is?
Nathan Harte
Yes, Heiko, we can chat about that after if you want, but I'll just -- we'd have to pull up some figures and discuss that one offline.
Heiko Ihle
Okay, perfect. Thank you.
David Wolfin
Thank you.
Nathan Harte
Thanks.
Operator
This concludes the question-and-answer session. I would like to turn the conference back over to David Wolfin, President and CEO for any closing remarks.
David Wolfin
Thank you for joining us on the call today. We appreciate your continued support. We promised to remain focused on our clear path to transformational growth over the next five years as we develop and expand the Avino Mine complex.
Thanks again and have a great day.
Operator
This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
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Avino Silver & Gold Mines Ltd. (ASM) Q4 and Year-end 2022 Financial Results Conference Call Transcript