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Pretivm Records Third Quarter 2020 Operating and Financial Results; Brucejack Continues to Deliver Strong Cash Flow and Remains On-Track to Achieve 2020 Guidance

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Pretivm Records Third Quarter 2020 Operating and Financial Results; Brucejack Continues to Deliver Strong Cash Flow and Remains On-Track to Achieve 2020 Guidance

 

 

 

 

 

Third Quarter and First Nine Months 2020 Highlights:

  • Gold production – Q3: 86,136 ounces; YTD: 259,443 ounces
  • AISC1 – Q3: $1,016 per ounce of gold sold; YTD: $971 per ounce of gold sold
  • Free cash flow1 – Q3: $66.8 million; YTD: $191.4 million
  • Production and sales volume on-track, unaffected by COVID-19
  • End of quarter cash balance: $175.0 million

 

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 for the three and nine months ended September 30, 2020 and 2019, available on the Company’s website and on SEDAR and EDGAR.

 

Pretium Resources Inc. (TSX:PVG) (NYSE:PVG) announces operating and financial results for the third quarter and first nine months 2020 (see “Key Operating Metrics” and “Key Financial Metrics” tables below).

 

“Brucejack continues to deliver strong cash flow and we remain on target to meet our annual production, free cash flow and AISC guidance,” said Jacques Perron, President and Chief Executive Officer of Pretivm. “In the first nine months of the year, the mine produced just over 259,000 ounces of gold generating $448.0 million in revenue and $191 million in free cash flow.”

 

2020 Guidance

 

2020 Production Guidance Maintained

 

The Company produced 259,443 ounces of gold during the first nine months 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 in the fourth quarter 2020 at an average rate of approximately 3,500 tonnes per day due to planned maintenance and an increased focus on waste management from increased lateral development with the objective of operating at the nominal rate of 3,800 tonnes per day at the end of the quarter. 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 97.0%.

 

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 Maintained

 

Total cash costs1 and all-in sustaining costs were $763 and $971 per ounce of gold sold, respectively, for the first nine months of 2020. Management expects to achieve our total cash costs guidance range of $750 to $860 per ounce of gold sold and AISC guidance range of $960 to $1,120 per ounce of gold sold.

 

AISC estimates 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 enhanced COVID-19 protocols, infill definition diamond drilling and a high-density test reverse circulation (“RC”) drilling grade control program to increase the volume of grade information necessary to enhance mine planning and optimize gold production.

 

Sustaining capital expenditures for the year, a component of AISC, are expected to be between $30.0 and $33.0 million, which includes additional definition drilling and mill building repairs. Other capital expenditures include approximately $10.0 to $15.0 million in expansion capital expenditures and approximately $10.0 million for regional exploration.

 

2020 Free Cash Flow Forecast Maintained

 

Free cash flow for the first nine months of 2020 was $191.4 million at an average realized gold price1 of $1,758 per ounce. We expect to achieve our 2020 free cash flow forecast range of $205 million to $275 million which was based on an average realized gold price of $1,800 per ounce.

 

While operating under the COVID-19 safety protocols, the Company will focus on preserving liquidity in the form of cash and cash equivalents and reducing the amount outstanding under its existing Loan Facility.

 

Impact of COVID-19

 

The Company’s primary commitment is the safety and health of its workforce and neighbouring communities in northwest British Columbia. There were no cases of COVID-19 identified at the Brucejack Mine as of October 29, 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; and BC Ministry of Health, BC Centre for Disease Control: Protecting Industrial Camp Workers, Contractors, and Employers Working in the Agricultural, Forestry, and Natural Resource Sectors During the COVID-19 Pandemic (July 28, 2020). The Company has developed management plans to mitigate the spread of COVID-19 and protect the well-being of its employees, communities and other stakeholders.

 

The Company incurred $6.8 million of additional production costs to date in 2020 related to employee salaries, travel costs, contractors and consultants 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.

 

 

Third Quarter and First Nine Months 2020 Operating and Financial Highlights

 

Key Operating Metrics

 

  3 months ended Sep. 30,   9 months ended Sep. 30,  
  2020 2019   2020 2019  
Gold produced (oz) 86,136 88,227   259,443 258,168  
Head grade (g/t gold) 8.6 9.1   8.4 8.9  
Gold Recovery (%) 97.6 97.0   96.9 96.9  
Silver produced (oz) 130,975 124,958   364,233 368,989  
Gold sold (oz) 81,068 90,713   257,576 258,100  
Silver sold (oz) 104,242 108,250   302,524 309,666  
Ore mined (wet tonnes) 344,063 325,228   1,054,331 970,659  
Mining rate (tpd) 3,740 3,535   3,848 3,556  
Ore milled (dry tonnes) 325,420 309,754   997,821 929,047  
Mill throughput (tpd) 3,537 3,367   3,642 3,403  

 

 

 

 

 

 

 

 

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

 

 

Key Financial Metrics

 

  3 months ended Sep. 30,   9 months ended Sep. 30,  
In thousands of USD,
except for per ounce data
2020 2019   2020 2019  
Revenue 154,876 132,735   448,003 349,056  
Cost of sales ($) 92,209 86,150   288,269 243,530  
Cost of sales ($/oz of gold sold)1 1,137 950   1,119 944  
Earnings from mine operations ($) 62,667 46,585   159,734 105,526  
Net earnings ($) 31,175 6,259   69,672 20,868  
Net earnings ($/share) 0.17 0.03   0.37 0.11  
Adjusted earnings ($)1,2 50,863 34,024   125,910 67,564  
Adjusted earnings ($/share)1,2 0.27 0.18   0.68 0.37  
Cash generated by operating activities ($) 83,371 77,813   228,040 158,940  
Free cash flow ($)1 66,809 65,126   191,359 134,501  
Production cost ($/milled dry tonne) 192 181   189 178  
AISC ($/oz)1 1,016 878   971 896  
Average realized price ($/oz)1 1,935 1,486   1,758 1,378  
Long-term debt ($)3 368,061 413,222   368,061 413,222  
Cash & cash equivalents ($) 175,009 16,583   175,009 16,583  

 

 

 

 

 

 

 

 

 

 

 

 


The table contains quarterly information derived from the Company’s unaudited quarterly condensed consolidated interim financial statements.

 

  1. Refer to the “Non-IFRS Financial Performance Measures” section at the end of this news release for reconciliation.
  2. Adjusted earnings are adjusted to exclude specific items not reflective of the underlying operations, including: gain (loss) on financial instruments at fair value, amortization of Loan Facility (defined below) transaction costs, accretion on convertible notes, and deferred income tax expense.
  3. As at September 30, 2020, long-term debt does not include the current portion of the Company’s Loan Facility in the amount of $66.7 million. In the comparable period in 2019, long-term debt does not include the current portion of the Company’s Loan Facility in the amount of $64.4 million.

 

Third Quarter 2020 Production Overview

 

  • As previously announced, the Company reported a fatality resulting from an incident that occurred on July 31, 2020 at the Brucejack Mine. The tragic incident occurred during maintenance at a support facility on surface. The safety and well-being of our workforce is our most important core value and we have renewed our commitment to improve our safety performance.
  • Production totaled 86,136 ounces of gold and 130,975 ounces of silver in the third quarter 2020. In the comparable period in 2019 production totalled 88,227 ounces of gold and 124,958 ounces of silver. Increased tonnes processed in the third quarter 2020 offset the higher gold grade in the third quarter 2019. COVID-19 did not directly affect third quarter 2020 gold production or sales.
  • At the end of the third quarter, 4,223 ounces of gold doré and 3,808 ounces of gold in concentrate were recorded in finished goods inventory at a cost of $1,038 per ounce, which includes depreciation and depletion.
  • In the third quarter, a total of 325,420 tonnes of ore, equivalent to a throughput rate of 3,537 tonnes per day, were processed. This was an increase from the comparable period in 2019, in which a total of 309,754 tonnes of ore, equivalent to a throughput rate of 3,367 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, a temporary compassionate suspension of activity after the fatality, a focus on lateral development and stope availability. In the comparable period in 2019, the mill was in 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 8.6 grams per tonne gold in the third quarter 2020 compared to 9.1 grams per tonne gold in the third quarter 2019.
  • Gold recovery for the third quarter 2020 averaged 97.6% compared to 97.0% in the comparable period in 2019.
  • In the third quarter, 344,063 wet tonnes of ore were mined, equivalent to a mining rate of 3,740 tonnes per day. In the comparable period in 2019, 325,228 wet tonnes of ore were mined, equivalent to a mining rate of 3,535 tonnes per day.
  • We continued our lateral development at a targeted rate of approximately 1,000 meters per month. During the three months ended September 30, 2020, a total 3,086 meters of lateral development and 263 meters of vertical development were completed.
  • During the third quarter 2020, diamond drilling activity continued with four diamond drills on site conducting infill and resource drilling. Infill diamond drilling targeted reserves proximal to mine infrastructure to build stope inventory and provide flexibility for near term mining. Over the quarter, 34,265 meters of infill diamond drilling were completed.
  • Infill diamond drilling in the fourth quarter 2020 will continue 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 2021.
  • Resource expansion drilling also commenced in the third quarter 2020. Approximately 5,050 meters were completed to the north toward the West Zone to target Inferred Resources and previously intersected mineralization outside of the current Mineral Resource.
  • The test RC drilling grade control program was introduced in staged phases, with the first drill in operation at the beginning of the second quarter on the 1080-meter level. Two additional RC drills were commissioned and commenced drilling during the third quarter. A total of 30,870 meters of test RC drilling were completed in the third quarter 2020.

 

Third Quarter 2020 Financial Overview

 

  • In the third quarter, the Company generated revenue of $154.9 million, which included $155.9 million of revenue from contracts with customers plus a loss on trade receivables at fair value related to provisional pricing adjustments of $1.0 million. During the comparable period in 2019, the Company generated revenue of $132.7 million which included $130.9 million of revenue from contracts with customers plus a gain on trade receivables at fair value related to provisional pricing adjustments of $1.8 million. The increase in revenue in the third quarter 2020 was primarily the result of higher gold prices realized on ounces sold partially offset by lower gold ounces sold due to lower production and the timing of sales.
  • In the third quarter 2020, the Company sold 81,068 ounces of gold at an average realized price of $1,935 per ounce, generating $153.2 million in revenue from contracts with customers. In the comparable period in 2019, the Company sold 90,713 ounces of gold at an average realized price of $1,486 per ounce, generating $129.1 million in revenue from contracts with customers. The average London Bullion Market Association AM and PM market price over the three months ended September 30, 2020 was $1,909 (2019 – $1,472) per ounce of gold.
  • Total cost of sales for the third quarter 2020 was $92.2 million or $1,137 per ounce of gold sold2 compared to $86.2 million or $950 per ounce of gold sold in the comparable period in 2019. Cost of sales increased primarily due to higher production costs for additional lateral development, definition drilling, the impact of COVID-19 safety protocols ($2.1 million), as well as higher depreciation and depletion expenses. Cost of sales per ounce of gold sold also reflect lower volumes sold in the quarter.
  • In the third quarter, production costs, after adjustments for changes in inventories, were $59.0 million compared to $55.1 million in the comparable period in 2019. Production costs increased in respect of contractors, supplies and consumables due to additional lateral development and definition drilling. Production costs also increased due to the impact of COVID-19 safety protocols, mainly for employee salaries and travel costs in the amount of $2.1 million in the quarter.
  • Total cash costs for the third quarter 2020 were $755 per ounce of gold sold compared to $640 per ounce of gold sold in the comparable period in 2019. Total cash costs increased due to higher production costs for additional lateral development and definition drilling as well as employee salaries and travel costs associated with COVID-19 safety protocols. Total cash costs per ounce of gold sold also increased due to lower gold ounces sold in the period.
  • AISC for the third quarter 2020 totaled $1,016 per ounce of gold sold compared to $878 per ounce of gold sold in the comparable period in 2019. AISC increased for the same reasons as total cash costs, higher sustaining capital expenditures and costs associated with the departure of a former executive. AISC was partially offset by higher silver by-product credits and lower treatment and refinery charges. Costs associated with COVID-19 safety protocols and the departure of an executive impacted AISC by $42 per ounce of gold sold.
  • In the third quarter, the Company incurred $9.2 million on sustaining capital expenditures compared to $8.0 million the comparable period in 2019. Significant sustaining capital expenditures during the period included capitalized development costs ($1.7 million), the purchase of underground drills ($1.1 million) and mill building repairs ($0.8 million).
  • Net earnings in the third quarter 2020 were $31.2 million ($0.17 per share) compared to $6.3 million ($0.03 per share) in the third quarter 2019. Adjusted earnings1 were $50.9 million ($0.27 per share) in the third quarter 2020 compared to $34.0 million ($0.18 per share) in the third quarter 2019. The increase is primarily due to higher gold prices realized on ounces sold, a decrease in the gain (loss) on financial instruments at fair value, a decrease in deferred income tax expense partially offset by an increase in production costs due to higher volumes of ore processed, costs due to COVID-19 and higher depreciation and depletion expense.
  • Cash and cash equivalents were $175.0 million as at September 30, 2020 increasing by $151.8 million from $23.2 million as at December 31, 2019.
  • Over the first nine months 2020, the Company repaid $50.0 million of its senior secured loan facility (the “Loan Facility”). As at September 30, 2020, the outstanding balance on the Loan Facility was $348.0 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 has been completed and is now awaiting assay results. The exploration program evaluated several distinct zones that have the potential to host a high-grade, epithermal related gold systems, porphyry copper-gold deposits and volcanogenic massive sulphide deposits.

 

The 2020 program included drilling at the Hanging Glacier Zone, located 4.5 kilometers northwest of Brucejack, the A6 Zone, located approximately 14 kilometers northeast of Brucejack, the Koopa Zone, located 30 kilometers east-southeast of Brucejack, and the Haimila Zone, located 25 kilometers southeast of Brucejack. At Hanging Glacier, 9,800 meters of drilling was completed to test an area where assay results from soil and prospecting samples returned anomalous gold values. To follow up on the results of the 2019 program, 11,900 meters of drilling was completed at A6 to target volcanogenic massive sulphide mineralization. In 2019, drilling at Koopa intersected wide intervals of low-grade, structurally-controlled epithermal-style gold mineralization. In 2020, 2,200 meters of drilling was completed to target deeper, potentially higher-grade parts of the system. At East Snowfield, 1,000 meters of drilling was completed to test a high-grade gold structure intersected during previous drilling campaigns. At Haimila, 780 meters of drilling was completed to test porphyry copper-gold style alteration and veining identified at surface.

 

The grassroots exploration program completed during the summer also included 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 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.

 

Patrick Godin, P.Eng., Pretivm’s Vice President and Chief Operating Officer is the QP responsible for the regional grassroots 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 nine months ended September 30, 2020 and 2019 are filed on SEDAR and EDGAR and are available on our website at www.pretivm.com.

 

About Pretivm

 

Pretivm is an intermediate gold producer with the high-grade underground Brucejack Mine in northern British Columbia.

 

Posted October 30, 2020

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