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Pretivm Records Second Quarter 2021 Operating and Financial Results; Remains On-track for Annual Guidance; Cash Position Now Exceeds Debt

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Pretivm Records Second Quarter 2021 Operating and Financial Results; Remains On-track for Annual Guidance; Cash Position Now Exceeds Debt

 

 

 

 

 

Pretium Resources Inc. (TSX:PVG) (NYSE:PVG) announces operating and financial results for the second quarter 2021 (see “Key Operating Metrics” and “Key Financial Metrics” tables below).

 

All amounts are in US dollars unless otherwise noted. This release should be read in conjunction with the Company’s Financial Statements and Management’s Discussion and Analysis (“MD&A”) for the three and six months ended June 30, 2021 and 2020, available on the Company’s website and on SEDAR and EDGAR.

 

“The second quarter of 2021 started under some challenging circumstances, but thanks to the hard work of our team we made consistent improvements through the quarter and we remain on track to achieve our annual guidance,” said Jacques Perron, President and Chief Executive Officer of Pretivm. “We accomplished another profitable quarter with $152.3 million in revenue, generated $50.7 million in free cash flow and we have reached a key turning point where our cash position now exceeds our debt.”

 

“Our resource expansion drill programs continue to successfully intercept high-grade mineralization immediately adjacent to existing underground infrastructure. Follow-up drilling is currently underway targeting the potential expansion of the Valley of the Kings deposit. Drilling results are expected to be released throughout the remainder of the year and will contribute to the updated Mineral Resource estimate we plan to release in the first half of next year.”

 

Second Quarter 2021 Highlights

  • Our top priority continues to be the health and safety of our employees, contractors and neighbouring communities in northwest British Columbia. We worked 707,834 hours with one lost-time injury during the second quarter 2021. There were no outbreaks of COVID-19 at the Brucejack Mine in the second quarter.
  • Production was 83,083 ounces of gold in the second quarter of 2021, compared with 90,419 ounces in the second quarter of 2020. Lower production in the second quarter 2021 reflects the residual effects of the COVID-19 outbreak in the first quarter, as well as performance issues with several stopes during and following the outbreak. Stope performance improved over the course of the quarter and at the end of the second quarter there were 7,718 ounces of gold remaining in-circuit compared to 998 ounces in the second quarter 2020.
  • Revenues of $152.3 million from the sale of 84,618 ounces of gold. Revenue in the second quarter 2021 represents an 8.6% decrease from the second quarter of 2020 driven primarily by a 11.9% reduction in gold ounces sold, partially offset by a 3.8% increase in the average realized price(1) of gold to $1,804 per ounce.
  • Another profitable quarter, with $0.16 in net earnings per share and $0.15 in adjusted earnings per share(1,2). Net earnings were $30.7 million and adjusted earnings(1,2) were $28.5 million for the quarter, compared to the second quarter of 2020 when net earnings were $36.1 million and adjusted earnings(1,2) were $32.9 million. The decrease was primarily due to lower ounces of gold sold, partially offset by decreases in deferred income tax expenses and cost of sales.
  • Revenues drove EBITDA(1) of $72.7 million and free cash flow(1) of $50.7 million. EBITDA and free cash flow in the second quarter 2021 decreased compared to the second quarter 2020 ($86.1 million and $82.7 million, respectively) due to lower revenues and increased levels of capital expenditures.
  • AISC(1) of $1,099 per ounce of gold sold is within annual guidance. AISC in the second quarter 2021 was higher than AISC of $911 per ounce of gold sold in the second quarter of 2020. The strengthening Canadian dollar, reduced sales volumes as well as higher levels of planned sustaining capital expenditures contributed to higher AISC. Planned sustaining capital expenditures include accelerated rates of underground development, comprehensive drill programs and improvement‐oriented capital expenditures.
  • We remain on track to achieve our 2021 guidance of 325,000 to 365,000 ounces of gold produced at an AISC between $1,060 and $1,190 per ounce of gold sold. We have lowered the expected range of sustaining capital expenditures by $10.0 million to $40.0 -$45.0 million and we are increasing our expected range of expansion capital expenditures by $10 million to $65.0 – $75.0 million. Free cash flow(1) is expected to be within the existing guidance range of $120.0 to $170.0 million.
  • Cash and cash equivalents increased to $202.5 million as at June 30, 2021 from $174.8 million as at December 31, 2020 and included the repayment of $54.7 million in debt in the quarter. As at June 30, 2021, we had long term debt of $195.2 million and available liquidity of $400.8 million including cash and cash equivalents and the undrawn revolving portion of our senior secured loan facility.
  • On August 9, 2021, we completed a refinancing of our Loan Facility. The amended Loan Facility consists of a $100.0 million amortizing, non-revolving term credit facility and a $250.0 million revolving credit facility (the “Revolving Facility”), further increasing our liquidity as well as reducing our quarterly repayments to $5.9 million under the Term Facility from $16.7 million under the term facility of our former Loan Facility.
  • Underground drilling continues to confirm potential for Mineral Resource expansion at Brucejack. Resource expansion drilling intercepted high-grade gold mineralization, demonstrating the potential to extend the Valley of the Kings deposit directly to the north and at depth, adjacent to existing infrastructure. Follow-up drill programs and near-mine exploration programs are currently under way and results are expected through the third and fourth quarters of 2021.
  • Executing on our objective to reduce carbon emissions. We have committed to purchase battery electric vehicles to replace our fleet of diesel-powered underground haul trucks. We forecast a reduction of approximately 24% or ~6,900 tonnes of carbon dioxide equivalent (tCO2e) annually after the roll out of this multi-year plan from 2021 to 2023.
  1. Refer to the “Non-IFRS Financial Performance Measures” section for a reconciliation of these amounts.
  2. Refer to the revised definition of adjusted earnings in the “Non-IFRS Financial Performance Measures” section.

 

Second Quarter 2021 Operations Overview

 

Key Operating Metrics

  3 months ended Jun. 30, 6 months ended Jun. 30,
  2021 2020   2021 2020  
Ore milled (t) 330,480 327,262   671,537 672,401  
Mill throughput (tpd) 3,632 3,596   3,710 3,695  
Head grade (g/t gold) 8.6 8.9   8.4 8.3  
Gold recovery (%) 97.4 96.7   97.1 96.6  
Gold produced (oz) 83,083 90,419   168,878 173,307  

Abbreviations: t (tonnes), tpd (tonnes per day), g/t (gram per tonne) and oz (ounces).

 

We established COVID-19 management plans and implemented enhanced protocols and preventative measures to mitigate the spread of COVID-19 at the onset of the pandemic in 2020.

 

We continue to follow our COVID-19 management plans as well as directives of federal, provincial and regional authorities. We also continue to enhance our commitment to preventative measures for our workforce and local communities, and under the guidance of the local health authority, a program to administer COVID-19 vaccinations was initiated at the Brucejack Mine.

 

There have been no outbreaks of COVID-19 at the Brucejack Mine during or since the end of the second quarter 2021.

 

During the three months ended June 30, 2021, a total of 330,480 tonnes of ore, equivalent to a throughput rate of 3,632 tonnes per day, were processed. This was a 1% increase from the comparable period in 2020, in which a total of 327,262 tonnes of ore, equivalent to a throughput rate of 3,596 tonnes per day, were processed.

 

The mill feed grade averaged 8.6 grams per tonne gold for the second quarter of 2021 compared to 8.9 grams per tonne gold in the comparable period in 2020. Mill feed grade was lower due to planned mine sequencing and lower grade stopes mined in the period. Gold recovery for the second quarter of 2021 was 97.4% compared to 96.7% in the comparable period in 2020.

 

For the six months ended June 30, 2021 a total of 671,537 tonnes of ore, equivalent to a throughput rate of 3,710 tonnes per day, were processed at mill feed grade of 8.4 grams per tonne. The tonnes processed, mill feed grade and gold recovery for the first six months of 2021 were consistent with the comparable period in 2020.

 

We continued our lateral development during the three months ended June 30, 2021, achieving approximately 1,153 meters per month (2020 – 1,075 meters per month) for a total of 3,460 meters completed during the second quarter 2021 (2020 – 3,224 meters).

 

Diamond drilling activity continued to progress during the second quarter of 2021, with nine diamond drills on site conducting infill and resource expansion drilling. Infill diamond drilling targeted Mineral Reserves proximal to mine infrastructure to build stope inventory and provide flexibility for near term mining. A total of 50,680 meters of diamond drilling was completed for the three months ended June 30, 2021.

 

We expect to continue to focus on advancing underground development to expand mine access at depth and to the west. The increased development should provide sufficient access to build the stope inventory required to allow mining operations to optimize gold production and additional platforms for resource expansion drilling. As of June 30, 2021, we had 316,500 drilled tonnes of stope inventory, an increase of 14.7% from 276,000 tonnes at March 31, 2021.

 

During the three months ended June 30, 2021, the Brucejack Mine produced 83,083 ounces of gold and 110,645 ounces of silver. For the comparable period in 2020, we produced 90,419 ounces of gold and 123,926 ounces of silver. The decrease in gold production was due to the residual effects of the COVID-19 outbreak in the first quarter of 2021, as well as performance issues with several stopes during and following the outbreak. Stope performance improved over the course of the quarter and as at June 30, 2021 there were 7,718 ounces of gold remaining in-circuit compared to 998 ounces as of June 30, 2020.

 

Second Quarter 2021 Financial Overview

 

Key Financial Metrics

 

  3 months ended Jun. 30, 6 months ended Jun. 30,  
In thousands of USD, except for per oz data 2021 2020 Restated (1)   2021 2020 Restated (1)  
Gold sold (oz) 84,618 96,047   166,325 176,508  
Average realized price ($/oz)2 1,804 1,738   1,804 1,677  
Revenue ($) 152,308 166,567   294,736 293,127  
Cost of sales ($) 97,844 99,895   191,640 184,036  
EBITDA ($)2 72,749 86,137   140,809 142,397  
Net earnings ($) 30,725 36,107   57,320 44,877  
Per share – basic ($/share) 0.16 0.19   0.31 0.24  
Per share – diluted ($/share) 0.16 0.19   0.30 0.24  
Adjusted earnings ($)2,3 28,471 32,944   53,822 48,167  
Per share – basic ($/share)2,3 0.15 0.18   0.29 0.26  
Production cost ($/milled tonne) 214 196   206 187  
Total cash cost ($/oz)2 854 749   842 766  
AISC ($/oz)2 1,099 911   1,053 950  

 

Abbreviations: t (tonnes), tpd (tonnes per day), g/t (gram per tonne) and oz (ounces).

  1. Amounts included in the table above for the three and six months ended June 30, 2020 have been restated to account for the voluntary change in accounting policy related to exploration and evaluation (“E&E”) expenditures. Refer to the “Change in Accounting Policy” section at the end of this news release.
  2. Refer to the “Non-IFRS Financial Performance Measures” section at the end of this news release.
  3. In addition to the voluntary change in accounting policy related to exploration and evaluation expenditures, adjusted earnings has been restated to reflect management’s new definition as described in the “Non-IFRS Financial Performance Measures” section.

 

The gold price rose over the course of 2020 amid economic uncertainty that was exacerbated by the COVID-19 pandemic starting in March 2020. The gold price declined in the first quarter of 2021 before increasing during the second quarter of 2021 and remained higher than in the comparative periods of 2020. The average London Bullion Market Association AM and PM market price over the three and six months ended June 30, 2021, was $1,815 (2020 – $1,711) and $1,806 (2020 – $1,646) respectively per ounce of gold.

 

For the three months ended June 30, 2021, we sold 84,618 ounces of gold, a 11.9% decrease from 96,047 ounces of gold sold in the comparable period in 2020. The reduction in gold ounces sold was due to lower production as well as changes in inventory due to the timing of sales relative to production and higher levels of gold remaining in-circuit as at June 30, 2021. The average realized gold price was $1,804, a 3.8% increase from the average realized gold price in the comparable period in 2020.

 

Revenue of $152.3 million for the second quarter 2021 decreased by 8.6% from $166.6 million in the second quarter 2020. The decrease in revenue was primarily the result of lower ounces of gold sold, partially offset by the increase in the average realized gold price.

 

Total cash costs(1) for the three months ended June 30, 2021 were $854 per ounce of gold sold compared to $749 per ounce of gold sold in the comparable period in 2020. Total cash costs increased primarily due to higher production costs and a lower amount of gold ounces sold in the period.

 

All-in sustaining costs(1) for the three months ended June 30, 2021 totaled $1,099 per ounce of gold sold compared to $911 per ounce of gold sold in the comparable period in 2020. AISC increased for the same reasons as total cash costs as well as higher levels of sustaining capital expenditures. Sustaining capital expenditures increased for the three months ended June 30, 2021 due to accelerated rates of underground development, comprehensive drill programs and improvement‐oriented capital expenditures.

 

The impact of the strengthening Canadian dollar on total production costs during the second quarter of 2021 increased total cash costs and AISC by approximately $85 per ounce of gold sold in the period compared to the comparable period in 2020.

 

Production costs associated with COVID-19 safety protocols and the COVID-19 outbreak impacted total cash costs and AISC by approximately $22 per ounce of gold sold in the second quarter of 2021, compared to approximately $50 in the comparable period of 2020.

 

Net earnings and comprehensive earnings for the three months ended June 30, 2021 were $30.7 million compared to $36.1 million for the comparable period in 2020. The decrease in net earnings was primarily attributed to lower revenues, partially offset by a decrease in interest and finance expense on the Loan Facility, a decrease in deferred income tax expense and a decrease in costs of sales.

 

Earnings before interest, taxes, depreciation and amortization (“EBITDA”)(1) of $72.7 million in the second quarter of 2021, decreased from $86.1 million in the comparable period of 2020 primarily due to decreased revenues.

 

Adjusted earnings for the three months ended June 30, 2021 were $28.5 million, compared to $32.9 million for the comparable period in 2020. Adjusted earnings was impacted by the same reasons as net earnings as well as fluctuations in foreign exchanges rates during the period.

 

Liquidity and Capital Resources

 

Cash Flow

  3 months ended Jun. 30, 6 months ended Jun. 30,
In thousands of USD 2021   2020
Restated(1)
  2021   2020
Restated(1)
 
Cash generated by operating activities ($) 73,077   91,171   134,340   142,455  
Cash used in financing activities ($) (57,495 ) 673   (75,135 ) (22,268 )
Cash used in investing activities ($) (22,337 ) (8,424 ) (32,631 ) (17,905 )
Effect of foreign exchange rate changes on cash and cash equivalents ($) 364   748   1,216   (722 )
Change in cash & cash equivalents ($) (6,391 ) 84,168   27,790   101,560  
Free cash flow ($)2 50,740   82,747   101,709   124,550  
  1. Amounts included in the table above for the three and six months ended June 30, 2020 have been restated to account for the voluntary change in accounting policy related to E&E expenditures. Refer to the “Change in Accounting Policy” section at the end of this news release.
  2. Refer to the “Non-IFRS Financial Performance Measures” section at the end of this news release.

 

During the three months ended June 30, 2021, we incurred $11.1 million on sustaining capital expenditures compared to $5.2 million in the comparable period in 2020. Sustaining capital expenditures during the period included underground development, resource drilling, and a purchase of the first electric haul truck. In the comparable period in 2020, sustaining capital expenditures included construction costs of the bulk gravity lab, capitalized development, and purchase of the underground ventilation regulators.

 

During the three months ended June 30, 2021, we incurred $18.9 million on expansion capital expenditures compared to $2.5 million in the comparable period in 2020. Significant expansion capital expenditures incurred during the period included construction costs for the new permanent camps at the Brucejack Mine, the new assay lab and integrated core shack. In the comparable period of 2020, expenditures included construction costs of the new mill dry.

 

Free cash flow for the three months ended June 30, 2021 were $50.7 million, compared to $82.7 million for the comparable period in 2020.

 

At June 30, 2021, the undrawn portion of the Loan Facility was $198.3 million with $1.7 million (C$2.1 million) used for a letter of credit supporting a reclamation deposit requirement.

 

Subsequent to the end of the quarter, on August 9, 2021, we refinanced the Loan Facility with the Amended Loan Facility (see news release dated August 9, 2021). The Amended Loan Facility is comprised of the $100.0 million Term Facility and the $250.0 million Revolving Facility.

 

The Term Facility was used to refinance the existing term loan ($100.0 million on the closing date) and the Revolving Facility is available for general corporate purposes. The Amended Loan Facility will mature on August 8, 2025. The Term Facility is to be repaid by way of seventeen equal quarterly installments of principal plus accrued interest commencing on September 30, 2021. Any funds drawn on the Revolving Facility are repayable in a single, lump sum payment (principal and accrued and unpaid interest) on the maturity date.

 

2021 Guidance

 

     
Gold Production   325,000 – 365,000 oz
Average grade   7.5 – 8.5 g/t
Recovery rate   ~ 97%
Total cash cost   $820 – $920 / oz sold
Sustaining capital(2)   $40 – $45 million
AISC   $1,060 – $1,190 / oz sold
Expansion capital(2)   $65 – $75 million
Free cash flow(1)   $120 – $170 million

 

Abbreviations: t (tonnes), g/t (gram per tonne) and oz (ounces).

(1) Free cash flow is based on a gold price of $1,700 per ounce.
(2) The guidance for sustaining capital and expansion capital has been revised.

 

We have lowered the expected range of sustaining capital expenditures to $40.0 – $45.0 million from $50.0 – $55.0 million and are increasing our expected range of expansion capital expenditures to $65.0 – $75.0 million from $55.0 – $65.0 million.

 

All other 2021 guidance, previously announced in our news release dated January 18, 2021, remains unchanged.

 

We have lowered our guidance range for sustaining capital expenditures, a component of AISC, due to reduced activity levels in the first quarter due to the COVID-19 outbreak at the Brucejack Mine, as well as to reflect updated timing of activities and purchases. Sustaining capital expenditures include the capitalized portion of underground development and drill programs as well as improvement-oriented expenses, such as electric underground haul trucks to reduce costs related to ventilation and maintenance, increase productivity and reduce our carbon footprint.

 

Expansion capital expenditures include construction of permanent camps and projects to support the growth and to improve the efficiency of operations. We have increased our guidance range for expansion capital expenditures due to increased costs of input materials, more recent estimates provided by vendors, detailed engineering being completed and construction activities advanced in the first half of 2021 and, to a lesser extent, the strengthening of the Canadian dollar relative to the US dollar.

 

Qualified Persons

 

Patrick Godin, P.Eng., Vice President and Chief Operating Officer, Pretium Resources Inc. is a Qualified Person as defined in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects, and has reviewed and approved the scientific and technical information contained in this news release, other than in respect of our drilling programs.

 

Stephanie Wafforn, P.Geo., Pretivm’s Resource Manager is the QP, as defined by NI 43-101, responsible for our drilling programs and has reviewed and approved the scientific and technical information in this news release related thereto.

 

About Pretivm

 

Pretivm is an intermediate gold producer and owns 100% the high-grade underground Brucejack Mine in northern British Columbia.

 

Posted August 13, 2021

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