ELD:CC - SSR Mining: Stock In Selling Mode After The Turkish Earthquake

Summary

• SSR Mining Inc. reported a Gold equivalent production of 182,655 GEOs in 4Q22. The company sold 172,042 GEOs (146,385 Au Oz and 2,097,482 Ag Oz).
• For 2023, Gold Production is expected to be between 600K and 670K Au ounces, and Silver production between 8 Moz and 9 Moz.
• Çöpler mine was not in this destructive earthquake red zone, and the company did not notify shareholders about any damage at the mine.
• I recommend buying SSR Mining Inc. between $14.35 and $13.8, with possible lower support at $13.15.

Introduction

Denver-based SSR Mining Inc. ( SSRM ) released its fourth-quarter and FY22 production results on February 8, 2023. Also, the company released its three-year outlook update.

Important note: This article is an essential update to my article published on January 4, 2023. I have been following SSRM on Seeking Alpha since 2021.

I recommend reading my preceding article, which detailed the balance sheet history until 3Q22. It will be excellent homework before analyzing the fourth quarter results coming at the end of February.

Rod Antal, President and CEO of SSR Mining, said in the press release:

We enter 2023 with all assets operating at a steady state, supporting our expectations for a strong year of production and free cash flow generation. We expect to deliver first production from ?öpler’s Çakmaktepe Extension project in 2023 and we are also initiating waste stripping activities at Marigold’s Red Dot later this year, in line with Marigold’s optimized life of mine plan.

1 - 4Q22 and FY22 Gold production commentary

1.1 - Production in GEOs

SSR Mining reported a Gold equivalent production of 182,655 GEOs in 4Q22. The company sold 172,042 GEOs (146,385 Au Oz and 2,097,482 Ag Oz).

FY22 production of 623,819 GEOs within the lower end of the revised guidance. The company sold 607,942 GEOs in FY22.

FY22 was $1,339 per ounce, meeting guidance as well. The AISC for the 4Q22 was $1,358 per ounce. AISC was still high even if it significantly decreased sequentially. Inflationary pressures and high CapEx used this quarter is the reason for this elevated AISC.

Rod Antal, President and CEO of SSR Mining, said in the press release:

While our free cash flow outlook remains robust, AISC are moderately higher year-over-year due to a combination of inflationary pressures, sustaining capital commitments to develop and ramp-up the Çakmaktepe Extension project, and capital and operating costs, including haul truck purchases, associated with the acceleration of planned waste stripping activities at Marigold’s Red Dot target.

As a reminder, 2022 guidance was lowered during the preceding quarter by 14% due to the Çöpler hiccup.

The potential halt follows a cyanide leak found at the mine from a pipeline that delivers solution to the heap leach pad. Eight kilograms of cyanide reportedly leaked, with the leak being contained to the mine site itself.

Note: The company expected a consolidated production of 620K to 655K Oz with an AISC of $1,315-$1,345 per GEO.

Below is the production per mine, 3Q22 versus 4Q22.

As we see above, Marigold, Seabee, and Çöpler did very well this quarter. Çöpler produced only 65,603 Au oz in 4Q22 from 3,733 Au oz in 3Q22.

1.2 - FY23 Guidance

For 2023, Gold Production is expected to be between 600K and 670K Au ounces, and Silver production between 8 Moz and 9 Moz.

Gold equivalent production is expected between 700K and 780K GEOs compared with FY22 of 623,819 GEOs. An 18.6% increase year over year using the guidance mid-point.

AISC is expected between $1,365 and $1,425 per ounce in 2023, up 4.9% from FY22.

Finally, SSRM expects to maintain an average production base of approximately 700 K GEO annually through 2025 without significant CapEx requirements through the end of the decade.

Also, the company indicated that it plans to raise its 2023 CapEx by about 50% ($123 million) from its 2022 CapEx. Rod Antal, President and CEO of SSR Mining, said in the press release:

At ?öpler, we continue to advance the C2 expansion project, while Marigold should begin to define some of the longer-term upside presented by the New Millennium, Trenton Canyon and Buffalo Valley targets. Overall, the business is in a good position both operationally and financially as we begin 2023, and we look forward to delivering the anticipated strong production growth, free cash flow generation and capital returns to shareholders.”

1.3 - Investment Thesis

Despite a steep SSR Mining Inc. selloff on Friday that I consider unwarranted, this gold miner is a sound long-term investment. SSRM should be accumulated long-term, especially after last week's stock haircut.

The Çöpler, the company's flagship mine in Turkiye, is an excellent asset that will produce between 240K and 270K GEOs in 2023, or an increase of 33.3% from 2022.

I believe that Friday's selloff was triggered by the news of the strong earthquake in Turkiye, which killed probably over 25,000 people and damaged a large part of the country.

However, Çöpler mine was not in this destructive earthquake red zone, and the company did not notify shareholders about any damage at the mine so far.

A quick look at Çöpler on the map (green dot) shows that the mine is close to the North Anatolian fault but presents a more moderate risk.

However, it's paramount to trade short-term LIFO a minimum of 50% of your SSRM position to take advantage of the gold and silver price volatility that will continue in 2023. Gold closed at $1,865 per ounce on Friday, down from well over $1,900 per ounce a week earlier; after a bullish U.S. job market report, gold and silver prices are now bullish after the market expectation of lower inflation and milder FED action in 2023. Gold is still up nearly 3% YoY.

2 - Stock performance

SSRM follows tightly the VanEck Vectors Gold Miners ETF ( GDX ) and Eldorado Gold ( EGO ), which owns two mines in Turkiye. However, SSRM is now down 12% on a one-year basis after a sharp selloff on Friday.

Technical Analysis (Short Term) and Commentary

Note: The graph has been adjusted for the dividend.

SSRM forms an ascending triangle pattern, with resistance at $15.75 and support at $14.20.

The ascending triangle is a bullish formation that usually forms during an uptrend as a continuation pattern. There are instances when ascending triangles form as reversal patterns at the end of a downtrend, but they are typically continuation patterns. Regardless of where they form, ascending triangles are bullish patterns that indicate accumulation.

I suggest trading LIFO for about 45%-50% of your position and keeping a core long-term amount for a much higher payday. The company is paying a 1.92% dividend yield.

I suggest selling between $15.5 and $16.00, with the next higher resistance at $16.25, and waiting patiently for a retracement between $14.35 and $13.8, with possible lower support at $13.15.

Watch the price of gold like a hawk.

Warning: The TA chart must be updated frequently to be relevant. It is what I am doing in my stock tracker. The chart above has a possible validity of about a week. Remember, the TA chart is a tool only to help you adopt the right strategy. It is not a way to foresee the future. No one and nothing can.

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