Before market opened on Thursday, Silver Standard Resources Inc.(NASDAQ:SSRI) posted extraordinary second quarter production results and increased 2015 guidance. Silver Standard has made it again. First quarter production exceeded expectations, and now second quarter has crushed our estimates. At Marigold, gold production of 48.7 thousand ounces beat our estimate by 29%. Silver production also impressed, exceeding our forecast by 13%.
Company’s second quarter production results outperformed our estimates on fairly every metric. While production declined at both operations quarter-over-quarter, this was anticipated, as the company finished an 11-day planned mill shutdown at Pirquitas, and worked through the next phase of stripping in the Mackay pit at Marigold as it works toward the higher grade benches in fourth quarter of 2015.
Marigold produced 48,685 ounces of gold in the quarter, 29% higher than our forecast of 37,698 ounces. Gold grade was below we expected, as the additional lower grade ore (treated as waste in the reserve model) downgraded the posted grade, however, correspondingly decreased the strip ratio. Approximately 34,670 ounces of gold were stacked on the leach pads during the quarter, which was mainly in-line with our forecast, and thus, the beat on production relative to our forecast was led by a greater amount of production from ounces previously under leach on the pad. Tonnes mined grew by 3% in the quarter, illustrating the continuing trend of more efficient mine operating performance.
Pirquitas produced 2.4 million ounces of silver and 2.7 million pounds of zinc during the quarter, 13% higher than our forecast of 2.2 million ounces and 16% higher than our estimate of 2.3 million pounds, correspondingly. Milling rates and silver recoveries were in line with our estimates, but higher silver grades translated in the beat against our forecast. The firm persists to stockpile a noteworthy amount of lower grade material, including 420 kt in second quarter (compared to 347 kt milled) at an average grade of 98 g/t. In our perspective, at current metal prices, this stockpile material would be marginal, and may not be processed.
The firm grew 2015 production outlook for Marigold to 195,000 to 205,000 ounces gold from 160,000 to 175,000 ounces gold, as the firm noticed the results of the assay program started in January 2015 reflect the presence of additional low grade material which is presently treated as waste in the reserve model. The result is additional gold ounces anticipated in 2015. The firm also grew production outlook at Pirquitas to 9.5-10.5 million ounces silver from 9 to 10 million ounces silver for 2015, as the firm persists to realize better ore availability and higher silver grade than originally expected, along with capitalizing on improved process control improvements.
After updating our estimates for the updated outlook, our 2015 EPS forecast has increased to $0.27, from $0.17; and our cash flow per share forecast has grew to $1.13 from $0.95. After updating our estimates for second quarter production results, revised 2015 outlook, and markto-marketing the company’s Pretium holdings, our valuation grew 2.6% to $7.36 per share (based on long-term prices of $1,300 per ounce gold and $19 per ounce silver and a 3% discount rate).
At spot prices and a 5% discount rate, our net asset valuation forecast is $3.39 per share.
We believe Silver Standard’s shares to outperform its competitors today, however, we reiterate our “Sector Perform” rating, as we forecast Silver Standard presently trades at 1.70 times NAV5% (based on our estimates) at spot prices, versus its gold competitors at 1.17 times.