Pretium Resources Inc. announces operating and financial results for the second quarter and first-half 2020 (see “Key Operating Metrics” and “Key Financial Metrics” tables below).
“Brucejack delivered another profitable quarter with record free cash flow,” said Jacques Perron, President and Chief Executive Officer of Pretivm. “In the first six months of the year the mine produced 173,307 ounces of gold generating $293.1 million in revenue and $124.6 million in free cash flow, surpassing our full-year free cash flow target.”
“However, no quarter at Pretivm is considered a success unless it is accomplished safely. The loss of one of our employees, announced a few days ago, is a tragic reminder of the importance of safety in all mine operations. Our thoughts are with the employee’s family and loved ones. We will work tirelessly to ensure a safe workplace for everyone at Brucejack, which will directly support our efforts to operate efficiently and profitably.”
1 Refer to the “Non-IFRS Financial Performance Measures” section at the end of this news release for reconciliation.
2020 Guidance
2020 Production Guidance Maintained
The Company produced 173,307 ounces of gold during the first half of 2020 and expects to meet 2020 gold production guidance at the Brucejack Mine of 325,000 ounces to 365,000 ounces. Production is planned to continue for the remainder of 2020 at an average rate of approximately 3,500 tonnes per day due to planned shutdowns and an increased focus on waste management from accelerated lateral development. The average annual gold grade is expected to remain in the guidance range between 7.6 grams per tonne and 8.5 grams per tonne at an average gold recovery of 97%.
Management believes 2020 production guidance remains achievable assuming there is no new significant impact on operations at the Brucejack Mine, including due to the novel coronavirus (“COVID-19”) pandemic. We have taken precautions to mitigate the risk of COVID-19. However, the COVID-19 pandemic and any future emergence and spread of similar pathogens could have a material adverse impact on our business, operations and operating results, financial condition, liquidity and market for our securities.
2020 Financial Guidance Updated
Total cash costs and all-in sustaining costs (“AISC”) were $766 and $950 per ounce of gold sold, respectively, for the first half of 2020. Annual financial guidance for 2020 has been updated to include costs for COVID-19 protocols, which are expected to remain in place for the remainder of 2020, of approximately $15.0 million and additional drilling of approximately $6.5 million. Accordingly, we have adjusted our cash costs guidance upwards to a range of $750 to $860 per ounce of gold sold from $725 to $830 per ounce of gold sold and AISC guidance upwards to a range of $960 to $1,120 per ounce of gold sold from $910 to $1,060 per ounce of gold sold.
AISC estimates continue to include costs associated with lateral development at a rate of approximately 1,000 meters per month through 2020. In addition, the AISC estimates include costs associated with a high-density reverse circulation (“RC”) drilling grade control program and definition drilling to increase the volume of grade information necessary to enhance mine planning and optimize gold production.
Sustaining capital expenditures for the year are expected to be approximately $40.0 million, an increase from $30.0 million, primarily due to additional definition drilling and mill building repairs. Other capital expenditures include approximately $15.0 million in expansion capital expenditures and approximately $10.0 million for regional exploration.
2020 Free Cash Flow Forecast Updated
Free cash flow for the first half of 2020 was $124.6 million at an average realized gold price1 of $1,677 per ounce. With improved gold prices, our free cash flow forecast for 2020 has been modified to a range of $205 million to $275 million based on an average gold price of $1,800 per ounce. This compares with our prior forecast of $100 million to $170 million based on an average gold price of $1,450 per ounce. If gold prices were to decrease to $1,600 per ounce, the low end of our free cash flow forecast would be $175 million.
During the quarter, as a precautionary measure in response to the continuing operational risks related to COVID-19, the Company drew down $16.0 million of the revolving portion of the Loan Facility to increase available liquidity. The Company will focus on preserving liquidity while we operate under the COVID-19 safety protocols.
Impact of COVID-19
The Company’s primary commitment is the safety and health of our workforce and neighbouring communities in northwest British Columbia. There were no cases of COVID-19 identified at the Brucejack Mine as of August 5, 2020.
Throughout the COVID-19 pandemic, the Brucejack Mine has operated continuously under the guidance and directives provided by Ministry of Energy, Mines and Petroleum Resources Guidance to Mining and Smelting Operations during COVID-19 (March 23, 2020); and Northern Health COVID-19: Interim Guidelines for Industrial Camps (March 25, 2020). The Company has developed management plans to mitigate the spread of COVID-19 and protect the well-being of our employees, communities and other stakeholders.
The Company incurred $4.7 million of additional production costs during the quarter related to employee salaries and travel costs to sustain operations with enhanced safety measures in effect. As the threat of COVID-19 remains a risk, the Company expects these costs to continue to be incurred to safely sustain operations.
1 Refer to the “Non-IFRS Financial Performance Measures” section at the end of this news release for reconciliation.
Second Quarter and Half-Year 2020 Operating and Financial Highlights
Key Operating Metrics
| 3 months ended Jun. 30, | 6 months ended Jun. 30, | ||||||
| 2020 | 2019 | 2020 | 2019 | ||||
| Gold produced (oz) | 90,419 | 90,761 | 173,307 | 169,941 | |||
| Head grade (g/t gold) | 8.9 | 8.9 | 8.3 | 8.8 | |||
| Gold Recovery (%) | 96.7 | 96.9 | 96.6 | 96.9 | |||
| Silver produced (oz) | 109,332 | 135,797 | 233,258 | 244,031 | |||
| Gold sold (oz) | 96,047 | 85,953 | 176,508 | 167,387 | |||
| Silver sold (oz) | 83,642 | 104,442 | 198,282 | 201,416 | |||
| Ore mined (wet tonnes) | 352,594 | 337,044 | 710,268 | 645,431 | |||
| Mining rate (tpd) | 3,875 | 3,704 | 3,903 | 3,566 | |||
| Ore milled (dry tonnes) | 327,262 | 324,171 | 672,401 | 619,293 | |||
| Mill throughput (tpd) | 3,596 | 3,562 | 3,695 | 3,422 | |||
Abbreviations: t (tonnes), tpd (tonnes per day), g/t (grams per tonne), Au (gold) and oz (ounces).
Key Financial Metrics
| 3 months ended Jun. 30, | 6 months ended Jun. 30, | ||||||
| In thousands of USD, except for per ounce data | 2020 | 2019 | 2020 | 2019 | |||
| Revenue | 166,567 | 113,202 | 293,127 | 216,321 | |||
| Cost of sales ($) | 106,555 | 83,413 | 196,060 | 157,380 | |||
| Cost of sales ($/oz of gold sold)1 | 1,109 | 970 | 1,111 | 940 | |||
| Earnings from mine operations ($) | 60,012 | 29,789 | 97,067 | 58,941 | |||
| Net earnings ($) | 32,260 | 10,443 | 38,497 | 14,609 | |||
| Net earnings ($/share) | 0.18 | 0.06 | 0.21 | 0.08 | |||
| Adjusted earnings ($)1,2 | 49,184 | 17,013 | 75,047 | 33,540 | |||
| Adjusted earnings ($/share)1,2 | 0.26 | 0.09 | 0.40 | 0.18 | |||
| Cash generated by operating activities ($) | 92,131 | 41,183 | 144,669 | 81,127 | |||
| Free cash flow ($)1 | 82,747 | 34,356 | 124,550 | 69,375 | |||
| AISC ($/oz)1 | 911 | 940 | 950 | 905 | |||
| Average realized price ($/oz)1 | 1,738 | 1,319 | 1,677 | 1,319 | |||
| Average realized cash margin ($/oz)1 | 951 | 550 | 868 | 561 | |||
| Long-term debt ($)3 | 382,763 | 496,507 | 382,763 | 496,507 | |||
| Cash & cash equivalents ($) | 124,734 | 34,281 | 124,734 | 34,281 | |||
The table contains quarterly information derived from the Company’s unaudited quarterly condensed consolidated interim financial statements.
- Refer to the “Non-IFRS Financial Performance Measures” section at the end of this news release for reconciliation.
- Adjusted earnings are adjusted to exclude specific items not reflective of the underlying operations, including: loss on financial instruments at fair value, amortization of Loan Facility (defined below) transaction costs, accretion on convertible notes, and deferred income tax expense.
- As at June 30, 2020, long-term debt does not include the current portion of the Company’s Loan Facility in the amount of $66,667. In the comparable period in 2019, long-term debt does not include the current portion of the Company’s Loan Facility and Offtake Obligation in the amount of $75,069.
Second Quarter 2020 Production Overview
- Production totaled 90,419 ounces of gold and 109,332 ounces of silver in the second quarter 2020, on track to achieve 2020 annual guidance. Gold production was similar to 2019, when 90,716 ounces of gold and 135,797 ounces of silver were produced. COVID-19 did not directly affect second quarter gold production.
- In May 2020, the Brucejack Mine achieved a major milestone with the safe and profitable production of its one millionth ounce of gold since the first gold pour in 2017.
- In the second quarter, a total of 327,262 tonnes of ore, equivalent to a throughput rate of 3,596 tonnes per day, were processed. This was an increase from the comparable period in 2019, in which a total of 324,171 tonnes of ore, equivalent to a throughput rate of 3,562 tonnes per day, were processed. During the quarter, the mill operated below the permitted level of 3,800 tonnes per day due to scheduled and unscheduled maintenance, focus on lateral development and stope availability. In the comparable period in 2019, the mill was in the early phases of the planned production ramp-up, following receipt of amended permits in late 2018 to increase the rate of production from 2,700 tonnes per day to 3,800 tonnes per day.
- The mill feed grade averaged 8.9 grams per tonne gold for the second quarter of 2020 equivalent to 2019.
- Gold recovery for the second quarter of 2020 was 96.7% compared to 96.9% in the comparable period in 2019.
- In the second quarter, 352,594 wet tonnes of ore were mined, equivalent to a mining rate of 3,875 tonnes per day. In the comparable period in 2019, 337,044 wet tonnes of ore, equivalent to a mining rate of 3,704 tonnes per day.
- We continued our lateral development at a targeted rate of approximately 1,000 meters per month. During the three months ended June 30, 2020, a total 3,224 meters of lateral development and 43 meters of vertical development were completed.
- The RC drilling grade control program was introduced in staggered phases, with the first drill in operation at the beginning of the second quarter on the 1080-meter level. Towards the end of the quarter, as the equipment and personnel became available, a second and third RC drill were commissioned and commenced drilling on the 1140-meter level. A total of 22,164 meters of RC drilling were completed during the quarter.
- All diamond drilling activity was put on hold at the onset of the COVID-19 pandemic at the end of the first quarter to limit non-essential personnel at Brucejack. By the end of the second quarter, diamond drilling activity had resumed with four diamond drills on site conducting resource and infill drilling. Diamond drilling in the second quarter targeted reserves proximal to mine infrastructure to build stope inventory and provide flexibility for near term mining.
- Infill diamond drilling in the second half of 2020 is planned to progress west toward the Brucejack Fault Zone, to follow-up on the 2019 infill drill program. The program is intended to support mining in the first quarter of 2021. Drilling is also planned to continue to the north toward the West Zone and will target Inferred Resources and previously intersected mineralization outside of the current Mineral Resource.
Second Quarter 2020 Financial Overview
- In the second quarter, the Company generated revenue of $166.6 million, which included $164.7 million of revenue from contracts with customers plus a gain on trade receivables at fair value related to provisional pricing adjustments of $1.9 million. During the comparable period in 2019, the Company generated revenue of $113.2 million which included $109.1 million of revenue from contracts with customers and a gain on trade receivables at fair value related to provisional pricing adjustments of $4.1 million. The increase in revenue was primarily the result of higher gold prices and higher gold ounces sold in the period due to the timing of production and subsequent sales.
- In the second quarter 2020, the Company sold 96,047 ounces of gold at an average realized price of $1,738 per ounce, generating $163.3 million in revenue from contracts with customers. In the comparable period in 2019, the Company sold 85,953 ounces of gold at an average realized price of $1,319 per ounce, generating $107.6 million in revenue from contracts with customers. The average London Bullion Market Association AM and PM market price over the three months ended June 30, 2020 was $1,711 (2019 – $1,309) per ounce of gold.
- Total cost of sales for the second quarter 2020 was $106.6 million or $1,109 per ounce of gold sold1 compared to $83.4 million or $970 per ounce of gold sold in the comparable period in 2019. Cost of sales increased primarily due to higher production costs for employee salaries and travel costs related to COVID-19 protocols, as well as higher depreciation and depletion expenses.
- In the second quarter, production costs, after adjustments for changes in inventories, were $68.1 million compared to $57.2 million in the comparable period in 2019. Production costs include mining, processing, surface services and other and mine general and administrative costs.
- Total cash costs for the second quarter 2020 was $749 per ounce of gold sold2 compared to $702 per ounce of gold sold in the comparable period in 2019. Total cash costs increased due to higher production costs related to employee salaries and travel costs associated with COVID-19 safety protocols.
- AISC for the second quarter 2020 totaled $911 per ounce of gold sold compared to $940 per ounce of gold sold in the comparable period in 2019. AISC decreased primarily due to higher gold ounces sold offset by increased total cash costs.
- In the second quarter, the Company incurred $5.2 million on sustaining capital expenditures compared to $8.0 million the comparable period in 2019. Significant sustaining capital expenditures during the period included the construction of the new bulk gravity lab ($1.0 million), the purchase of a 120-tonne crane ($0.9 million) and capitalized development costs ($0.7 million). In the comparable period in 2019, sustaining capital expenditures were focused on the purchase of underground drills and capitalized development costs.
- Vertical development costs, including the costs to build new ventilation raises and access ramps that enable the Company to physically access ore underground on multiple mining levels, are capitalized. All costs associated with lateral development to access ore zones in preparation for mining are expensed.
- Earnings from mine operations were $60.0 million in the second quarter 2020 compared to $29.8 million in the second quarter 2019.
- Net earnings in the second quarter 2020 were $32.3 million compared to $10.4 million in the second quarter 2019 with the increase primarily resulting from more ounces sold at higher gold prices, a decrease in interest and finance expense offset by an increase in production costs, depreciation and depletion expense and deferred income tax expense.
- Adjusted earnings1 were $49.2 million in the second quarter 2020 compared to $17.0 million in the second quarter 2019.
- Cash generated from operating activities in the second quarter 2020 was $92.1 million compared to $41.2 million in the second quarter 2019.
- Free cash flow1 generated in the second quarter 2020 was $82.7 million compared to $34.4 million in the second quarter 2019.
- Average realized cash margin1 in the second quarter 2020 was $951 per ounce of gold sold compared to $550 per ounce of gold sold in the second quarter of 2019.
- Cash and cash equivalents were $124.7 million as at June 30, 2020 increasing by $101.6 million from $23.2 million as at December 31, 2019.
- The Company repaid $16.7 million of its $480.0 million senior secured loan facility (the “Loan Facility”). During the quarter, as a precautionary measure to increase available liquidity, the Company drew down $16.0 million of the revolving portion of the Loan Facility. At the end of the second quarter 2020 the outstanding balance on the Loan Facility was $364.7 million.
1 Refer to the “Non-IFRS Financial Performance Measures” section at the end of this news release for reconciliation.
Regional Grassroots Exploration
The 2020 regional exploration program on the Company’s Bowser Claims is currently underway with crew and equipment mobilized to site. The exploration program is evaluating several distinct zones that have the potential to host Eskay Creek-style volcanogenic massive sulphide deposits and high-grade, epithermal related gold systems.
The primary focus of the 2020 program is the A6 Zone, located approximately 14 kilometers northeast of Brucejack. To follow up on the results of the 2019 program, 10,000 meters of drilling is planned to target Eskay Creek-style volcanogenic massive sulphide mineralization.
The 2020 program will also include drilling at the Koopa Zone, located 30 kilometers east-southeast of Brucejack, the Hanging Glacier Zone, located 4.5 kilometers northwest of Brucejack, and the East Snowfield Zone, located 6 kilometers north of Brucejack. In 2019, drilling at Koopa intersected wide intervals of low-grade, structurally-controlled epithermal-style gold mineralization. In 2020, 1,500 meters of drilling is planned to target deeper, potentially higher-grade parts of the system. At Hanging Glacier, 1,200 meters of drilling is planned to test an area where assay results from soil and prospecting samples returned anomalous gold values. At East Snowfield, 1,000 meters of drilling is planned to test a high-grade gold structure intersected during previous drilling campaigns.
The grassroots exploration program will continue through the summer and also include soil sampling, prospecting, regional mapping and hyperspectral imaging.
Qualified Persons
Lyle Morgenthaler, B.A.Sc., P.Eng., Chief Mine Engineer, Pretium Resources Inc. is the Qualified Person (“QP”) as defined in National Instrument 43-101 Standards of Disclosure for Mineral Projects responsible for Brucejack Mine development, and has reviewed and approved the scientific and technical information contained in this news release relating thereto.
Kenneth C. McNaughton, M.A.Sc., P.Eng., Pretivm’s Vice President and Chief Exploration Officer is the QP responsible for the regional grass-roots exploration program and has reviewed and approved the scientific and technical information in this news release related thereto.
Our unaudited consolidated interim Financial Statements and MD&A for the three and six months ended June 30, 2020 and 2019 are filed on SEDAR and EDGAR and are available on our website at www.pretivm.com.
Webcast and Conference Call
The webcast and conference call to discuss the second quarter 2020 operating and financial results and updates will take place Thursday, August 6, 2020 at 8:30 am PT (11:30 am ET).
Webcast and conference call details:
| Thursday, August 6, 2020 at 8:30 am PT (11:30 am ET) | ||
| Webcast | www.pretivm.com | |
| Toll Free (North America) | 1-800-319-4610 | |
| International and Vancouver | 604-638-5340 | |
A recorded playback will be available until August 20, 2020:
| Toll Free (North America) | 1-800-319-6413 | |
| Access Code | 4889 |
About Pretivm
Pretivm is an intermediate gold producer with the high-grade underground Brucejack Mine in northern British Columbia.
For further information contact:
Troy Shultz
Manager, Investor Relations &
Corporate Communications
Pretium Resources Inc.
Suite 2300, Four Bentall Centre, 1055 Dunsmuir Street
PO Box 49334 Vancouver, BC V7X 1L4
(604) 558-1784
invest@pretivm.com
(SEDAR filings: Pretium Resources Inc.)
Contact Information:
Troy Shultz
Manager, Investor Relations &
Corporate Communications
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Contact Information:
Troy Shultz
Manager, Investor Relations &
Corporate Communications