Mr. Ron Clayton reports
TAHOE REPORTS STRONG MINE OPERATING EARNINGS FROM GOLD SEGMENTS FOR THIRD QUARTER 2017
Tahoe Resources Inc. has released solid financial and operating results for the third quarter and nine months ended Sept. 30, 2017. The company's balance sheet remains strong, with cash and cash equivalents of $182.1-million at Sept. 30, 2017, and very little debt.
Ron Clayton, president and chief executive officer of Tahoe, commented: "Despite challenges in Guatemala during the quarter, we are very pleased with our team's performance, particularly at our gold operations which produced 109,000 ounces at a total cash cost of $747 per ounce. The company remains focused on executing our strategy to advance near-term development projects in Canada and Peru. Although we reported a loss for the quarter, the results were negatively impacted by $14-million in costs (four cents per share) related to the suspension and care and maintenance of Escobal, and a $9-million non-recurring pretax expense (three cents per share) at La Arena as a result of completing negotiations to fulfill historical commitments made to the community. Except for these items, we would have reported positive earnings for the quarter on the strength of our gold operations alone. In Guatemala, we are gratified that the Supreme Court reinstated the Escobal licence in September, and are working diligently to resolve the Casillas road block and to obtain renewal of our export credential so that we can resume mining operations at Escobal. We believe the resolution of these two issues will follow the Constitutional Court decision on the appeals from the Supreme Court ruling."
KEY FINANCIAL AND OPERATING RESULTS
($ millions unless otherwise indicated)
Q3 2017 Q3 2016 Q3 YTD 2017 Q3 YTD 2016
Revenue $ 155.2 $ 234.7 $ 615.8 $ 595.1
Earnings (loss) and total
comprehensive income (loss) (8.4) 63.0 99.8 117.6
Earnings (loss) per share (0.03) 0.20 0.32 0.42
Adjusted earnings (loss) (1) (7.2) 65.7 101.7 162.0
Cash provided by operating activities 60.0 99.7 272.7 196.0
Cash provided by operating activities
before changes in working capital 37.0 126.0 269.3 311.3
Silver production (Moz) - 5.0 9.8 16.5
Gold production (Koz) 109 98 340 265
Total cash cost per silver
oz produced ($/oz) (1) (2) - 6.5 6.15 5.66
AISC per silver oz produced ($/oz) (1) (2) - 8.68 8.91 7.55
Total cash cost per gold oz
produced ($/oz) (1) (2) (3) 747 625 639 632
AISC per gold oz produced ($/oz) (1) (2) 1,088 974 954 979
Sustaining capital (including
capitalized drilling) 25,133 26,315 71,100 63,159
Project capital 28,600 30,110 96,793 87,741
Exploration expense 4.5 4.7 14.6 7.5
Corporate G&A (4) 11.7 7.5 34.7 38.0
(1) Non-generally accepted accounting principles financial measures
(2) Total cash costs and AISC are presented net of byproduct credits.
(3) Total cash costs for Q3 2017 included a $9-million non-recurring pretax expense at
La Arena as a result of completing negotiations to fulfill a historical commitment that
impacted total cash cost per gold ounce produced by $82 per ounce for Q3 2017 and $27
per ounce for Q3 YTD 2017.
(4) Corporate general and administrative includes non-cash, stock-based compensation.
Summary of Q3 2017
Strong operating and financial results from gold segments: Q3 2017 gold production totalled 108,700 ounces, including 19,400 ounces from Shahuindo. Production and costs in Q3 2017 reflected strong results at all of the company's gold mines, with total cash costs and AISC averaging $747 and $1,088 per ounce, respectively, in Q3 2017.
Shahuindo expansion plan remains on track: Construction of the initial 12,000-tonne-per-day crushing and agglomeration circuit at Shahuindo is now nearly complete, with commissioning initiated at the end of September. The additional 24,000 tpd crushing and agglomeration circuit remains on schedule and within guidance for commissioning by mid-year 2018. The project is planned to reach the full 36,000 tpd production rate by the end of 2018, providing an expected 80-per-cent ultimate gold recovery.
Bell Creek shaft project continues on plan: The sinking hoist was commissioned, and work began on the third and final pilot raise. The project remains on schedule and within guidance for commissioning in mid-year 2018, with a ramp-up through the end of the year.
Released improved 2017 gold production guidance at lower costs: In September, the company reinstated and increased its guidance for gold production to 400,000 to 450,000 ounces for 2017 due in large part to the positive mine plan reconciliation (higher grade and additional tonnes) experienced at La Arena year to date. Total cash cost estimates have been decreased by $50 per ounce to an estimated $650 to $700 per ounce, reflecting the higher anticipated production levels and better-than-anticipated cost performance year to date. Likewise, all-in sustaining costs decreased by $100 per ounce to a guidance range of $1,050 to $1,150 per ounce, driven by higher production and lower capital and exploration costs. The company remains in line to achieve its new guidance.
Conservative balance sheet management with $182-million in cash: Despite the continuing interruption of mining operations at Escobal, the company's balance sheet remains strong, with cash and cash equivalents of $182.1-million at Sept. 30, 2017. In addition, the company has access to $75-million of the $300-million revolving credit facility that matures on July 19, 2021. As previously reported, the credit agreement includes terms that limit borrowing to a maximum of $75-million during the period of suspension of the mining operations at Escobal as a result of the Calas claim in Guatemala. The revolving credit facility remains undrawn.
Timmins West mineral resource and reserve update: The company announced an updated mineral resources and mineral reserves for Timmins West in Canada. The company had significant growth in mineral reserves attributable to the initial mineral reserve for the 144 Gap deposit, a part of the Timmins West mine. Proven and probable mineral reserves at Timmins West increased from 233,000 ounces of gold at an average grade of 3.7 grams per tonne as reported Jan. 1, 2017, to 738,000 ounces of gold at an average grade of 3.2 g/t effective May 15, 2017. Measured and indicated mineral resources total 1.02 million ounces of gold at the Timmins West mine.
Update on Escobal mining licence and export credential: On July 5, 2017, the company was notified that the Supreme Court of Guatemala issued a temporary decision to provisionally suspend the Escobal mining licence of Minera San Rafael (MSR) in response to an action brought by Calas, an anti-mining non-governmental organization, against the Ministry of Energy and Mines (MEM). On Sept. 10, 2017, the Guatemalan Supreme Court issued a definitive decision that reinstated the Escobal mining licence. The ruling also ordered MEM to consult with the Xinka indigenous communities within certain geographic areas within 12 months. The ruling allows Escobal to restart operations immediately and to continue to operate during the consultation process. Although Tahoe believes that MEM complied with ILO Convention 169 before it issued the Escobal licence, it will fully support MEM in any of its future indigenous engagement.
Calas and other interested parties appealed the Supreme Court's decision reinstating the Escobal mining licence to the Constitutional Court, the highest court in Guatemala, which heard the matter on Oct. 25, 2017. The Constitutional Court is expected to rule on the appeals before the end of the year.
In June, 2017, the company filed its annual request to renew the export credential with MEM. However, MEM did not renew the credential because its renewal had become contingent on the Supreme Court's reinstatement of the Escobal mining licence. The credential therefore expired in August, 2017. After the Supreme Court reinstated the mining licence in September, 2017, MEM publicly stated that the export credential could now be legally renewed. However, contrary to such public declaration, MEM has yet to renew the credential. The company believes that MEM is unlikely to renew the export credential prior to the Constitutional Court ruling on the appeals.
Update on Guatemala road block: Since June 7, 2017, a group of protesters near the town of Casillas has blocked the primary highway that connects Guatemala City to San Rafael Las Flores and the Escobal mine. Operations were reduced between June 8 and June 19 to conserve fuel and were further curtailed on June 19, 2017.
While some of the protesters come from Casillas, which is approximately 16 kilometres from the mine, many more are from outside the municipality. The company has reason to believe that the blockade is politically motivated and is being substantially financed by anti-mining groups. As the roadblock continues, some protesters have become increasingly violent. Following the Sept. 10, 2017, court ruling that reinstated the Escobal mining licence, the company attempted to transport supplies to the mine site. Protesters blocked the passage of vehicles, and attacked the truck drivers and trucks. On a separate occasion, a helicopter attempting to deliver fuel to the mine was shot at. These violent episodes have put people's lives at risk, and violated the human rights of the company's employees, contractors and San Rafael Las Flores residents, particularly the right to freedom of movement, the right to liberty and security of person, and the right to work.
Tahoe deplores violence of any kind, and continues to focus on reaching a peaceful and expeditious conclusion to the roadblock at Casillas. The company is working with the government, community leaders and international mediation experts to develop a dialogue process aimed at resolving the matter. Once the roadblock is lifted, the export credential is renewed and the Supreme Court ruling is confirmed by the Constitutional Court, the company expects to be in a position to resume production at Escobal within a week.
Operations review
Escobal
The Escobal mine remained on standby during the third quarter with a focus on care and maintenance. There was no ore production, development, rehabilitation, paste fill or shotcreting operations during this time. Escobal has maintained the readiness of the equipment fleet for the orderly resumption of operations once the mine restarts.
Gold operations
LA ARENA
Q3 2017 Q3 2016 Q3 YTD 2017 Q3 YTD 2016
Gold ounces recovered (000s) 48 49 148 146
Costs per ounce gold produced (1)
Total cash costs per ounce net of byproduct credits $ 794 $ 593 $ 624 $ 626
All-in sustaining costs per ounce net of byproduct credits 1,038 864 831 859
Capital expenditures 7,687 9,456 20,005 22,547
Sustaining capital 7,687 9,456 20,005 22,547
Non-sustaining capital - - - -
(1) Non-GAAP financial measures
Mine operations
Production from the Calaorco pit totalled 3.1 million and 9.7 million tonnes of ore at an average strip ratio of 2.0 and 2.0 during Q3 2017 and Q3 YTD 2017, respectively. A total of 3.1 million and 9.8 million tonnes at average gold grades of 0.48 g/t and 0.49 g/t containing 48,400 and 153,900 gold ounces were placed on the leach pads during Q3 2017 and Q3 YTD 2017, respectively. Total cash costs for Q3 2017 included a $9-million non-recurring pretax expense as a result of completing negotiations to fulfill a historical commitment that impacted total cash costs by $189 per ounce for Q3 2017 and $60 per ounce for Q3 YTD 2017.
Mining operations continue to be focused in the phase 4, phase 5 and phase 6 areas of the Calaorco pit. Ore is currently being produced from phase 4 and phase 5, with phase 6 under development.
Process plant
The process plant performed well with an average of 12 hectares under irrigation throughout Q3 2017. The La Arena plant recovered 47.6 and 148.4 ounces of gold during Q3 2017 and Q3 YTD 2017. Gold recovery continues to be approximately 86 per cent.
SHAHUINDO
Q3 2017 Q3 2016 Q3 YTD 2017 Q3 YTD 2016
Gold ounces recovered (000s) 19 10 60 35
Costs per ounce gold produced (1)
Total cash costs per ounce net of byproduct credits $ 774 $ 742 $ 647 $ 638
All-in sustaining costs per ounce net of byproduct credits 1,328 990 1,066 1,258
Capital expenditures (2) 19,314 19,355 44,345 52,397
Sustaining capital 7,622 2,050 14,834 8,649
Non-sustaining capital 11,072 17,305 28,580 43,748
(1) Non-GAAP financial measures
(2) Commercial production at Shahuindo was declared on May 1, 2016. The figures presented for
Q3 YTD 2016 include precommercial production which reduced the capital expenditures.
Mine operations
Production from the Shahuindo pit totalled 1.8 million and 4.7 million tonnes of ore at an average strip ratio of 0.98 and 1.0 during Q3 2017 and Q3 YTD 2017, respectively. A total of 1.5 million and 3.8 million tonnes at average gold grades of 0.61 g/t and 0.63 g/t containing 28,600 and 7,200 gold ounces were placed on the leach pads during Q3 2017 and Q3 YTD 2017, respectively. Total cash costs net of byproduct credits for Q3 2017 are higher than Q3 YTD 2017 due to grade variance and timing of community costs in the quarter.
Process plant
The Shahuindo plant recovered 19.4 and 60.4 ounces of gold during Q3 2017 and Q3 YTD 2017, respectively. Primary leaching is focused on pad 2A, which is resulting in faster-than-expected leach cycles attributable to optimized coarse/fine ore blending. The average area under leach was 8.3 hectares during Q3 2017. Overall gold recovery increased from 58 per cent in January to 64 per cent at the end of Q3 2017, in line with the ramp-up to an ultimate recovery of 67 per cent for run-of-mine material.
Capital projects
Construction of leach pad 2B began in the Q3 2017 as planned. Pad 2B is scheduled to be placed into production in Q3 2018.
Permits for the operation of the first phase of the south waste rock dump were received in the third quarter, and the waste rock dump is currently in use. The south waste rock dump has sufficient capacity to accommodate waste rock mined from the Shahuindo pit through the end of 2018.
Dry commissioning of the 12,000 tpd crushing and agglomeration circuit was initiated late in Q3 as scheduled. A portion of the final purchase orders for the additional 24,000 tpd circuit has been deferred to early Q4 2017 due to modifications to the final engineering design. The company does not expect this to have an impact on the commissioning of the full 36,000 tpd plant anticipated in mid-year 2018. The project is planned to reach the full 36,000 tpd production rate by the end of 2018, providing an expected 80-per-cent ultimate gold recovery, in line with the prefeasibility study.
TIMMINS MINES
Q3 2017 Q3 2016 Q3 YTD 2017 Q3 YTD 2016
Gold ounces recovered (000s) 42 37 127 76
Costs per ounce gold produced (1)
Total cash costs per ounce net of byproduct credits $ 681 $ 635 $ 653 $ 640
All-in sustaining costs per ounce net of byproduct credits 1,034 1,112 1,046 1,131
Capital expenditures 25,047 21,013 80,814 56,767
Sustaining capital 9,824 14,944 36,260 32,199
Non-sustaining capital 15,223 6,069 44,554 24,568
(1) Non-GAAP financial measures
(2) Results prior to the acquisition date of April 1, 2016, are excluded.
Bell Creek
Underground ramp and sublevel development continues to advance in support of the life-of-mine production schedule, with approximately 2,850 metres and 8,200 metres of development completed in Q3 2017 and Q3 YTD 2017, respectively. Infill and definition drilling at the Bell Creek mine totalled 11,100 metres and 38,800 metres in Q3 2017 and Q3 YTD 2017, respectively.
The Bell Creek mine delivered 9,200 and 24,700 tonnes of ore to surface, mined from longitudinal long-hole stopes on multiple production sublevels during Q3 2017 and Q3 YTD 2017, respectively.
Timmins West
Underground ramp and sublevel development continues to advance in support of the life-of-mine production schedule, with approximately 2,700 metres and 8,250 metres of development completed in Q3 2017 and Q3 YTD 2017. Progress continued to be made on the infrastructure development at 144 Gap, which included ramp, raise and lateral development to access the resource. Underground infill and definition drilling completed at the Timmins West mine in Q3 2017 and Q3 YTD 2017 to improve resource/reserve definition totalled 23,800 metres and 92,300 metres, respectively.
The Timmins West mine delivered approximately 200,000 and 800,000 tonnes of ore to surface, mined from longitudinal and transverse long-hole stopes on multiple production sublevels from the Timmins West, Thunder Creek and 144 Gap deposits during Q3 2017 and Q3 YTD 2017, respectively.
Mill processing
Mill operations averaged 3,679 tpd and 3,704 tpd in Q3 2017 and Q3 YTD 2017, respectively. The mill processed a total of 300,000 and one million tonnes with an average gold feed grade of 3.98 g/t and 4.05 g/t recovering 41,700 and 127,000 gold ounces in Q3 2017 and Q3 YTD 2017, respectively. Process recovery for Q3 2017 and Q3 YTD 2017 averaged 96.3 per cent and 96.5 per cent, respectively.
Construction of the phase 5 tailings facility expansion continued in Q3 2017.
Capital projects
The Bell Creek shaft project continued on schedule during Q3 2017. Excavation of the third and final pilot raise started in Q3 from the 1,040 level. The enlargement of the second pilot raise had reached 682 m depth by the end of the period. The underground sinking hoist was commissioned, and the installation of the new steel sets were completed approximately 450 m below surface. Surface construction continued in Q3 with the completion of the new administration and security complex. The new hoist foundations were completed, and tenders for the installation of the hoist room and head frame were received.
Conference call
Tahoe's senior management will host a conference call and webcast to discuss the Q3 2017 results on Tuesday, Nov. 7, 2017, at 10 a.m. ET (7 a.m. PT). To join the call, please dial 1-800-319-4610 (toll-free from Canada and the United States) or 1-604-638-5340 (from outside Canada and the U.S.). The webcast will be available on the company's website, as will a recording of the call later in the day.
Complete financial results for Q3 2017, including the company's management discussion and analysis and other filings, will be posted on SEDAR and EDGAR, and on the company's website.
Qualified person statement
Technical information in this press release has been approved by Charlie Muerhoff, vice-president, technical services, Tahoe Resources, a qualified person as defined by National Instrument 43-101.
Technical disclosure
The basis of the Timmins West mine mineral resources and mineral reserves is from "National Instrument 43-101 Technical Report, Timmins West Mine, Timmins, Ontario, Canada," dated Sept. 20, 2017, with an effective date of May 15, 2017. Mineral resources include measured mineral resources of 36,100 tonnes with an average gold grade of 4.95 g/t containing 57,500 ounces of gold, indicated mineral resources of 7.5 million tonnes with an average gold grade of 3.99 g/t containing 966,500 ounces of gold and inferred mineral resources of 1.1 million tonnes with an average gold grade of 3.8 g/t containing 133,400 ounces of gold. Mineral resources are reported using a gold cut-off grade of 1.5 g/t. Mineral reserves include proven mineral reserves of 40,700 tonnes with an average gold grade of 3.61 g/t containing 47,200 ounces of gold and probable mineral reserves of 6.7 million tonnes with an average gold grade of 3.18 g/t containing 690,600 ounces of gold. Mineral reserves are reported using a gold cut-off grade of 2.0 g/t and a gold price of $1,250 per ounce. Mineral reserves are included in mineral resources.
Selected quarterly and year-to-date consolidated financial information from continuing operations is as shown in the attached table.
SELECTED QUARTERLY CONSOLIDATED FINANCIAL RESULTS
Q3 YTD Q3 YTD
Q3 2017 Q3 2016 (1) 2017 2016 (1)
Metal sold
Silver (000s oz) 489 4,800 10,345 14,573
Gold (000s oz) (2) 116.3 108.791 0.3424 257.483
Lead (000s t) - 1.9 4.1 6.7
Zinc (000s t) - 2.7 5.6 9.5
Realized price
Silver in concentrate (per oz) $ 18.12 $ 20.64 $ 17.71 $ 18.54
Gold in dore (per oz) 1,266 1,321 1,239 1,264
Lead (per t) - 2,204 2,379 1,829
Zinc (per t) - 2,513 2,864 2,160
LBMA/LME price (3)
Silver (per oz) 16.84 19.61 17.16 17.12
Gold (per oz) 1,278 1,335 1,251 1,260
Lead (per t) 2,334 1,873 2,259 1,780
Zinc (per t) 2,963 2,255 2,783 1,955
Revenues 155,201 234,721 615,823 595,105
Total operating costs 136,422 135,296 418,590 384,303
Earnings from operations 18,779 99,425 197,233 210,802
Earnings (loss) (8,380) 63,011 99,803 117,561
Earnings (loss) per common share
Basic (0.03) 0.20 0.32 0.42
Diluted (0.03) 0.20 0.32 0.42
Adjusted earnings (loss) (4) (7,225) 65,657 101,689 161,970
Adjusted earnings (loss)
per common share (4)
Basic (4) (0.02) 0.21 0.33 0.57
Diluted (4) (0.02) 0.21 0.33 0.57
Dividends paid 6.252 18,654 43.686 50,730
Cash flow provided by operating activities 48,675 78,679 223,321 141,650
Cash flow provided by operating activities
before changes in working capital (4) 37,039 125,987 269,335 311,257
Cash and cash equivalents 182,072 142,426 182,072 142,426
Total assets 3,127,529 3,033,218 3,127,529 3,033,218
Total long-term liabilities 315,979 276,180 315,979 276,180
Costs per silver ounce produced
Total cash costs net of byproduct credits (4) - 6.5 6.15 5.66
All-in sustaining costs per silver ounce
net of byproduct credits (4) - 8.68 8.91 7.55
Costs per gold ounce produced
Total cash costs net of byproduct credits (4) 747 625 639 632
All-in sustaining costs per gold ounce net
of byproduct credits (4) (5) 1,088 974 954 979
(1) Q3 YTD 2016 numbers include operational and financial information from the Timmins mines
beginning April 1, 2016, the date of acquisition, and operational and financial information
from Shahuindo beginning May 1, 2016, the commencement of commercial production.
(2) Commercial production at Shahuindo was declared on May 1, 2016. Revenues presented are
generated from the sale of gold ounces in dore beginning May 1, 2016. Precommercial
production revenues at Shahuindo are considered preoperating revenues and are credited
against construction capital through April 30, 2016. Included in the 257,500 gold ounces
sold for Q3 YTD 2016 are 31,500 gold ounces sold at Shahuindo, which include four months of
precommercial production ounces sold (7,600 ounces of gold in dore sold in the period of
January through April 2016, respectively).
(3) London Bullion Market Association (LBMA)/London Metal Exchange (LME) average closing prices
for each quarter presented
(4) Non-GAAP financial measures
(5) All-in sustaining costs net of byproduct credits per gold ounce produced exclude the impact
of $11-million in non-recurring transaction costs related to the acquisition of Lake Shore
Gold during Q3 YTD 2016.
About Tahoe Resources Inc.
Tahoe's strategy is to responsibly operate mines to world standards and to develop high-quality precious metals assets in the Americas.
We seek Safe Harbor.
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