Pretivm Reports Fourth Quarter and Year End 2017 Results

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March 8, 2018 News Release Pretivm Reports Fourth Quarter and Year End 2017 Results On track to achieve steady-state gold production by mid-to-late 2018 Vancouver, British Columbia, March 8, 2018;
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March 8, 2018 News Release Pretivm Reports Fourth Quarter and Year End 2017 Results On track to achieve steady-state gold production by mid-to-late 2018 Vancouver, British Columbia, March 8, 2018; Pretium Resources Inc. (TSX/NYSE:PVG) ( Pretivm or the Company ) is pleased to report financial and operating results for the fourth quarter and year end In the news release all quoted figures are in USD$ unless otherwise noted. The Company uses the following non-ifrs measures: total cash costs, all-in sustaining costs ( AISC ), average realized gold price, average realized margin, adjusted earnings (loss), and adjusted earnings (loss) per basic share. Refer to the Company s Management Discussion and Analysis and the Non-IFRS Financial Performance Measures section at the end of this news release for an explanation and discussion of these non-ifrs measures. Pretivm produced approximately 152,000 ounces of gold during the first six months of ramp-up at its Brucejack Mine, averaging 9.4 grams per tonne gold with an AISC of $852 per ounce of gold sold. The Company also reports significant progress in implementing its primary strategic objectives of optimizing operations and achieving operational grade control. Pretivm President & CEO Joseph Ovsenek said, Our financial performance was in line with our expectations for production ramp-up of Brucejack. Further, we have implemented several operational performance improvement initiatives, leveraging our experience in the fourth quarter of We are increasing our underground development rate to provide for optimal mining stope inventory, the integration of our grade control program is now underway and our financial health is robust. We expect to deliver on our H production guidance of 150,000 to 200,000 ounces of gold, and to achieve steady-state production by mid-to-late We also anticipate we will see more momentum towards those achievements in Q as our grade control program progresses. We remain confident in developing Brucejack into a premier low-cost intermediate gold producer by the end of Fourth Quarter and Six Month Production Overview Production totaled 70,281 ounces of gold and 96,004 ounces of silver in the fourth quarter of 2017, for a total of 152,484 ounces of gold and 179,237 ounces of silver produced during the first six months of production ramp-up. Mill feed grade averaged 8.2 grams per tonne gold in the fourth quarter and 9.4 grams per tonne gold for the first six months of ramp-up. Gold recoveries averaged 95.8% in the fourth quarter of 2017 for an average gold recovery rate of 96.2% for the first six months of production ramp-up. 1 Process plant throughput averaged 2,951 tonnes per day during the fourth quarter of 2017 for an average processing rate of 2,895 tonnes per day during the first six months of production ramp-up. Ore milled totaled 271,501 in the fourth quarter of 2017, for a total of 532,763 tonnes of ore milled during the first six months of production ramp-up. The Company submitted an application to increase the Brucejack Mine production rate to 3,800 tonnes per day in December. Fourth Quarter Financial Summary Revenue of $107.1 million was generated on sale of 86,514 ounces of gold and 107,900 ounces of silver. Total cost of sales was $80.2 million or $927 per ounce of gold sold. Total cash cost was $700 per ounce of gold sold and AISC was $893 per ounce of gold sold. As production increases, total cash costs and AISC per ounce sold are expected to decrease. Earnings from mine operations were $26.9 million. Net loss was $2.7 million or $0.01 per share. Adjusted earnings were $12.7 million or $0.07 per share. Cash and cash equivalents were $56.3 million at December 31, The Company has working capital of $40.6 million excluding the current portion of long-term debt as at December 31, Cash generated by operations was $33.4 million. Annual Financial Summary Revenue of $177.9 million was generated on sale of 141,927 ounces of gold and 127,746 ounces of silver. Total cost of sales was $125.1 million or $881 per ounce of gold sold. Total cash cost was $683 per ounce of gold sold and AISC was $852 per ounce of gold sold. Earnings from mine operations were $52.9 million. Net loss was $16.5 million or $0.09 per share. Adjusted earnings were $17.4 million or $0.10 per share. Cash generated by operations was $73.3 million. 2 Operating Results Three months ended December 31, Year ended December 31, Ore mined t 280, ,205 - Mining rate tpd 3,051-3,001 - Ore milled t 271, ,763 - Head grade g/t Au Recovery % Mill throughput tpd 2,951-2,895 - Gold ounces produced (1) oz 70, ,484 - Silver ounces produced oz 96, ,237 - Gold ounces sold oz 86, ,927 - Silver ounces sold oz 107, ,746 - The following abbreviations were used above: t (tonnes), tpd (tonnes per day), g/t (grams per tonne), Au (gold) and oz (ounces). (1) Gold ounces produced for the year ended December 31, 2017 excludes 8,510 ounces produced in the pre-commercial production period. Gold and silver production During the six months ended December 31, 2017, the Brucejack Mine produced 152,484 ounces of gold, which excludes 8,510 ounces of gold from pre-commercial production and 179,237 ounces of silver from low-grade stockpiles, development muck and stope ore. There is no comparable information as the Brucejack Mine achieved commercial production on July 1, During the six months ended December 31, 2017, the Company sold 141,927 ounces of gold and 127,746 ounces of silver. As at December , there were 7,716 ounces of gold doré and 10,328 ounces of gold in concentrate in finished goods. Processing During the six months ended December 31, 2017, a total of 532,763 tonnes of ore, equivalent to a throughput rate of 2,895 tonnes per day, was processed. The mill feed grade was 9.4 grams per tonne gold and recovery was 96.2%. We continue to review the mill process to optimize recoveries. The main operating units in the mill building are performing as expected. Planning is underway to replace the concentrate bagging system which caused increased mill downtime and maintenance requirements. On December 20, 2017, the Company submitted an application to the BC Ministry of Energy, Mines and Petroleum Resources and the BC Ministry of Environment and Climate Change Strategy to increase the Brucejack Mine production rate to 3,800 tonnes per day. The increase would result in an annual average production rate of million tonnes, up from 0.99 million tonnes (a daily average of 3,800 tonnes from 2,700 tonnes). The approval process is expected to 3 take approximately six to twelve months. Engineering is underway to assess the mill capacity upgrades required to increase the production rate. Based on preliminary engineering, the capital cost to increase the mill capacity is estimated to be less than US$25 million. The estimate will be updated when the engineering process is complete. Mining During the six months ended December 31, 2017, 552,205 tonnes of ore were mined, equivalent to a mining rate of 3,001 tonnes per day. During the fourth quarter, gold production was lower than expected as higher-grade stopes scheduled to be mined in December encountered operational issues (equipment down-time and mining execution), that prevented them from being mined and delivering higher grade ore to the mill. Both long-hole drills went down and the stopes could not be drilled off in time. Mining also encountered a hang-up when blasting a long-hole slot. These issues, combined with the limited stope inventory (no other high-grade stopes were accessible in the quarter) contributed to the lower than expected gold production. Pretivm has taken a number of steps to address these operational issues. To improve access and build stope inventory, the rate of underground development has been increased to 700 meters per month for 2018, up from the 420 meters originally contemplated in the Brucejack Feasibility Study. In addition, a third long-hole drill is now on site to provide back-up and contribute to the build-up of stope inventory. During the third and fourth quarter of 2017, two sills were established to open up two mining horizons for 2018, the 1200-meter Level to the 1320-meter Level and the 1320-meter Level to the 1440-meter Level. With the continued extension of the mining levels to the east and west within the two mining horizons and the increase in rate of development, stope inventory is expected to increase to 10 to 12 stopes with a range of grades by mid-year The availability of stopes representing a range of grades, including multiple higher grade stopes, will allow mining operations to optimize stope blending and provide alternative stopes with comparable grades for mining if required. The increased stope inventory is expected to improve the management of production grades as the ramp-up continues. Operational Grade Control The grade control program, designed to refine stope dimensions, reduce dilution and optimize grade, is underway. The program comprises sampling and drilling, and is currently being integrated into the mining process. Stope Ring Sampling As part of the grade control program, grade is estimated on a ring-by-ring basis to refine the shape of the long-hole stope prior to mining. Long-hole drill cuttings are selectively collected from each ring within a stope and split into a reduced sample size for assaying. Assayed data from each of the rings is then fed back into the short-term mine planning cycle to refine stope dimensions. 4 The upgraded and modified underground sample splitting station is now functional. The sample splitting station is used to further validate the sampling process. Reverse Circulation Drilling Another component of the grade control program, reverse circulation (RC) drilling to optimize stope definition, has commenced on a trial basis. The RC drill will cross-cut the stopes drilling 5- meter to 7.5-meter centers to refine stope location and dimensions prior to mining. The RC drilling will provide a larger sample per meter and is expected to be faster and more cost effective than core drilling, which has been used for infill drilling to date. With the operational grade control system now functioning and continued high definition drilling, steady-state gold production is now expected to be achieved by mid-to-late Reconciliation of 2017 ramp-up production Grade reconciliation to the reserve model for the period August 1, 2017 to December 31, 2017 was approximately 75% to 80% and attributed to: (a) the small, relatively unrepresentative sample size of production being analyzed, (b) rudimentary grade control without the grade control program operational and (c) lack of drill density in a significant area of the contributing stopes. During the period, ore from the stopes developed on the 1200-meter Level sill provided approximately 25% of mill feed. These stopes were mined in establishing the 1200-meter Level sill as part of the long-term mine plan and had a lower drill density than stopes on other levels of the mine. As the grade control program becomes operational and mining moves up from the 1200-meter Level into areas with higher drill density, reconciliation is expected to be more robust. Exploration Drilling for Porphyry Source An exploration drill program has been initiated to test for a porphyry source and evaluate the potential extension of the Valley of the Kings to the east. The drill program will follow-up on the success of the 2015 regional grass-roots exploration drill program. High-grade gold was intersected in the Flow Dome Zone, located approximately 500 meters east of the Brucejack Mine, confirming the presence of either a new stockwork zone or an extension of the Valley of the Kings deposit (see news release dated October 8, 2015). A drill has been set up underground on the eastern edge of the 1200-meter Level of the Valley of the Kings development. Two drill holes, each 1,600 meters long will serve to provide a continuum of information from the Valley of the Kings to the Flow Dome Zone. The drilling will also test below the Flow Dome Zone where structural geology combined with a geophysical anomaly suggests a potential porphyry source. Lyle Morgenthaler, B.A.Sc., P.Eng., Chief Mine Engineer, Pretium Resources Inc. is the Qualified Person ( QP ) responsible for Brucejack Mine development. Warwick Board, Ph.D., P.Geo, Pr.Sci.Nat., Vice President, Geology and Chief Geologist, Pretium Resources Inc. is the QP responsible for the Brucejack Mine reconciliation of 2017 ramp-up production and the Brucejack Mine exploration drilling. 5 Sustaining Capital During the year ended December 31, 2017, the Company spent $9.6 million on sustaining capital. Sustaining capital expenditures included the paste booster station, the grade control sampling station and gravity lab and normal course capitalized development costs incurred during production. Capitalized development includes costs to build new ventilation raises and ramps that enable the Company to physically access ore underground. Regional Exploration An extensive regional exploration campaign was initiated in 2015 to identify mineralized zones on the 1,250-square-kilometer, wholly-owned property similar to the Valley of the Kings and Eskay Creek deposits. A final data analysis is underway to refine high-priority targets for drilling in spring The comprehensive regional exploration program has included the collection of over 11,000 samples, regional mapping, prospecting, airborne geophysics, ground geophysics, hyperspectral mapping, and data compilation. To date, the program has resulted in the identification of three distinct areas that have the potential to host epithermal mineralization. Several gold and silver epithermal targets have been identified in the American Creek Zone located approximately 25 kilometers southeast of the Brucejack Mine. The American Creek valley is dominated by kilometer-scale north-south structures and localized east-west stockworks, which host elevated gold values of up to 62.5 grams of gold per tonne in rocks of the Lower Hazelton Group, Unuk River Formation, the same formation that hosts the Brucejack Mine. Geophysical conductors identified in the American Creek Zone are supported by coincident pathfinder minerals and trace elements associated with epithermal mineralization. The Koopa Zone, located approximately 30 kilometers east-southeast of the Brucejack Mine, is dominated by intensely quartz-sericite pyrite altered Salmon River Formation volcanics and Quock Formation sediments of the Upper Hazelton Group. As no previous work had been completed at this zone, 2017 efforts focused on prospecting and mapping, with ground geophysical surveys undertaken to assist with interpretations at depth and in areas with limited exposure. Prospective precious and base metal grab samples have been collected across the zone returning results as high as 5.28 grams of gold per tonne, 1,460 grams of silver per tonne, 9% lead and 25% zinc with geochemical signatures similar to intrusion-related epithermal gold deposits. Approximately 15 kilometers east of the Brucejack Mine, numerous high-grade gold boulders have been sampled at the Boulder Zone, with grades as high as grams of gold per tonne. Ground geophysics have been conducted over the area to find the source of the boulders. Alteration, geochemistry and Upper Hazelton Group rocks in the area do indicate the boulders are potentially VMS related. As results continue to be received, review and analysis of the extensive regional database continues with the expectation that additional high- priority areas will be identified. A private placement of 329,000 flow-through common shares of the Company at a price of C$15.20 per flow-through share was completed in two tranches on June 30 and July 14, 2017 for 6 total gross proceeds of $3.9 million (C$5.0 million). A portion of the proceeds of the private placement of flow-through common shares were used to fund the 2017 grass-roots exploration program. Planning is underway for the 2018 grassroots exploration program on the whollyowned Bowser Claim Group, which is expected to begin in late spring. Kenneth C. McNaughton, M.A.Sc., P.Eng., Chief Exploration Officer, Pretium Resources Inc. is the QP responsible for the 2017 regional grass-roots exploration program. Financial Results Three months ended December 31, Year ended December 31, (In thousands of US dollars, except per share or per oz) Revenue $ 107, ,933 - Earnings from mine operations (1) $ 26,890-52,853 - Net loss for the period $ (2,720) (8,564) (16,453) (61,212) Per share - basic $/share (0.01) (0.05) (0.09) (0.35) Per share - diluted $/share (0.01) (0.05) (0.09) (0.35) Adjusted earnings (loss) (1) $ 12,742 (6,869) 17,426 (11,324) Per share - basic (1) $/share 0.07 (0.04) 0.10 (0.07) Total cash and cash equivalents $ 56, ,791 56, ,791 Cash generated from (used by) operating activities $ 33,408 (4,924) 73,321 (12,205) Total assets $ 1,671,537 1,450,436 1,671,537 1,450,436 Long-term debt $ 293, , , ,160 Total cash costs (1) $/oz All-in sustaining costs (1,2) $/oz Average realized price (1) $/oz 1,211-1,239 - Average realized cash margin (1) $/oz (1)Refer to the Non-IFRS Financial Performance Measures section for a reconciliation of these amounts. (2)All-in sustaining costs for the year ended September 30, 2017 were not disclosed as commercial production only commenced on July 1, 2017 Working Capital and Liquidity Cash generated by operations of $73.3 million for the year ended December 31, 2017 reflects the first two quarters with revenue as we achieved commercial production on July 1, Our cash and cash equivalents as at December 31, 2017 totaled $56.3 million decreasing $85.5 million from $141.8 million at December 31, The decrease in cash is largely attributable to the completion of construction of the Brucejack Mine offset by cash flow from operations in the third and fourth quarters, the completed offering of convertible notes and the final advance under the senior secured term credit facility. As at December 31, 2017, the Company has working capital of $40.6 million excluding the current portion of long-term debt. The current portion of long-term debt includes the senior secured term credit facility including principal and accumulated interest totaling $365.9 million. The credit 7 facility is due at maturity on December 31, 2018; however, if necessary, the Company has the option to extend the maturity date to December 31, 2019 upon payment of an extension fee of 2.5% of the principal amount including accumulated interest. The Company s intention is to refinance the credit facility within the next year. Working capital items other than cash and cash equivalents consisted of inventories of $25.7 million (valued at cost), receivables and other of $19.6 million, offset by accounts payable and accrued liabilities of $60.4 million and the current portion of long-term debt of $375.0 million without considering the option to extend the credit facility to December 31, Three months ended December 31, 2017 compared to the three months ended December 31, 2016 Net loss for the three months ended December 31, 2017 was $2.7 million compared to $8.6 million for the comparable period ended December 31, The decrease in the loss was mainly attributed to earnings generated from operations offset by an increase in interest and finance expense. Earnings from mine operations were $26.9 million for the quarter ended December 31, 2017 compared to nil in the comparable period as the Company did not have mine operations in Net comprehensive loss for the three months ended December 31, 2017 was $2.7 million compared to net comprehensive loss of $27.7 million for the comparable period ended December 31, In the comparable period, comprehensive loss included $19.1 million from the translation of CAD functional currency results into the USD presentation currency. Foreign currency translation adjustments will not recur
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