Mr.
Jason Neal reports
TMAC REPORTS IMPROVING OPERATING AND FINANCIAL RESULTS FOR FIRST QUARTER OF 2018
TMAC Resources Inc. is
filing its first-quarter 2018 financial statements, and management's
discussion and analysis for the period ended March 31, 2018. The documents
may be found on the Company's website
or, once filed, on SEDAR.
Please read this news release in conjunction with these documents.
Jason Neal, President and Chief Executive Officer of TMAC, stated, "We
remain focused on improving performance in the processing plant. We
achieved our throughput target consistently in February and March,
although with modest improvement in recovery. This was expected as
several key initiatives only came online after quarter end. We achieved
positive cash flow from operating activities for the first time in the
first quarter. We are also encouraged by an increase in recovery in
April to 76%, and with a Falcon SB400 coming online for the beginning of
May to improve gravity recovery, we expect further improvement. As we
are not commenting quantitatively on the impact of this addition to the
processing plant today, we will provide data on May's performance once
available."
Gil Lawson, Chief Operating Officer of TMAC said, "We have been
concentrating our efforts on increasing the overall gravity recoverable
gold and have already seen some encouraging improvements with the
installation of our first Falcon SB400 gravity concentrator. This unit
alone will not allow us to meet our recovery targets, but its
installation is a significant step. Engineering and procurement are
underway for additional, larger gravity concentration units within the
primary grinding circuit and a high velocity gravity concentration unit
within the regrinding circuit to recover gravity recoverable gold.
Historical and TMAC's recent metallurgical tests have indicated that at
least 70% of the Doris mine contained gold can be recovered by gravity
processes, but throughout 2017 only around 20% of the gold was recovered
by gravity, which put severe gold overloading and stress on both the
flotation and concentrate treatment plant circuits. Additionally,
installation of the second concentrator line is nearing completion and
it too has a Falcon SB400 gravity concentrator as part of the primary
grinding circuit."
Mr. Lawson went on to say, "With additions in 2018, our operating team
is substantially stronger today than ever before in the young history of
our Company. Two senior metallurgists, our new Assistant General Manager
and our Senior Director, Metallurgy, are making great contributions to
improvements in the processing plant and our Director of Strategic Mine
Planning will contribute to optimizing the Doris mine initially, and our
other deposits on the horizon. We continue to make improvements to the
performance and culture at site, and, with the new management and
supervisory additions to our team, we expect to further accelerate our
momentum towards establishing a best in class operation".
FIRST QUARTER 2018 HIGHLIGHTS
Financial Results:
-
Cash and cash equivalents were $35.7 million and restricted cash was
$42.3 million as at March 31, 2018.
-
Cash flows from operating activities totalled $10.9 million.
-
Loss from mining operations totalled $2.6 million.
-
Net loss totalled $15.0 million, or $0.16 per share on a basic and
fully diluted basis.
-
19,540 ounces of gold were sold during the three months ended March
31, 2018 for proceeds of $33.0 million (US$26.0 million).
-
Realized an average price for gold sold of $1,689 (US$1,332) per ounce
during the three months ended March 31, 2018.
-
Cash Costs and All-in Sustaining Costs per ounce of gold sold were
$1,331 (US$1,049) and $2,288 (US$1,807), respectively, during the
three months ended March 31, 2018.
Management Team:
-
Jason Neal joined TMAC as President and Chief Executive Officer and as
a member of the board of directors on February 15, 2018.
-
Maarten Theunissen was promoted to Chief Financial Officer and Ron
Gagel assumed the role of Executive Vice President, Corporate Affairs,
effective April 1, 2018.
-
Jerome Girard joined TMAC as Assistant General Manager on March 6,
2018.
-
Mike Samuels joined the TMAC as Senior Director, Metallurgy on April
2, 2018.
-
Dan Redmond joined TMAC as Director of Strategic Mine Planning on
April 23, 2018.
Operations:
-
Mined 82,600 tonnes of ore at a grade of 8.5 grams per tonne ("g/t"),
containing 22,600 ounces of gold in the three months ended March 31,
2018. A good correlation between the Mineral Resource block models and
detailed geological mapping and chip sampling continues to be observed
in the mine, demonstrating confidence in Mineral Reserve estimates.
-
Processed 83,600 tonnes of ore at a grade of 10.9 g/t, containing
29,220 ounces of gold, with 20,650 ounces of gold being produced at an
average recovery of 71% and 18,832 ounces being poured in the three
months ended March 31, 2018, compared with 69,600 tonnes of ore
processed at a grade of 13.7 g/t, containing 30,700 ounces of gold,
with 21,200 ounces of gold being produced at an average recovery of
69% and 19,151 ounces being poured during the three months ended
December 31, 2017.
-
In April, the Plant processed 33,619 tonnes of ore at a grade of 7.7
g/t, containing 8,330 ounces of gold, with 6,370 ounces of gold being
produced at an average recovery of 76% and 6,750 ounces being poured.
-
Further optimization of the crushing circuit resulted in more
consistent throughput in downstream unit operations, and the Plant
averaged 93% of design throughput during the three months ended March
31, 2018 and achieved 101% of design throughput in March and 110% of
design throughput in April.
-
With the Plant operating at more stable levels from the beginning of
February, further studies could be performed that identified that the
gravity recovery of gold by the Plant is considerably less than the
design specification of approximately 70%. The flotation circuit is
designed to treat the remaining 30% of non-gravity recoverable gold.
To improve gravity gold recovery, a Falcon SB400 gravity concentration
unit was installed and commissioned at the end of April.
-
Some of the high-grade stockpiled ore, with an estimated grade in
excess of 28 g/t, will be used to increase the feed grade in May, once
an improvement in recovery is observed; the grade of ore fed into the
Plant during the month of April was intentionally kept low to minimize
gold losses to tailings until there was evidence that gravity gold
recovery had improved.
-
The continued improvement in recovery by the new gravity unit, located
in the primary grinding circuit, has allowed the Company to develop a
strategy to increase the overall gravity gold recovery effort through
the purchase and installation of additional gravity recovery units in
2018 with greater capacity, as well as allow for the continuous
scavenging of very fine gold, which may be missed by flotation and the
targeting of fine gold that is being liberated within the regrind
circuit.
-
The gold recovered by the additional gravity effort will report to the
separate batch leaching circuit where more than 98% gold recovery has
been demonstrated; this should also reduce loadings within the
flotation, leaching and resin circuits and related recovery losses.
-
Ore stockpiles at March 31, 2018 were estimated to contain 76,100
tonnes of ore at an average grade of 9.3 g/t, or 22,800 ounces of
contained gold. Included in that balance is a segregated high-grade
stockpile that contained 8,500 tonnes of ore at an estimated grade in
excess of 28 g/t at March 31, 2018. Mining in April was at a
substantially higher grade than processing in the month, and the
high-grade stockpile increased to 12,500 tonnes of ore at an estimated
grade in excess of 30 g/t as at April 30, 2018.
Financial and Corporate Developments:
-
On May 10, 2018, TMAC entered into a diesel fuel purchase and storage
agreement with a subsidiary of Macquarie Bank Ltd ("Macquarie")
whereby Macquarie will purchase and deliver diesel fuel (the "Diesel
Purchase Agreement") to Hope Bay and store the fuel in TMAC's
tanks at Roberts Bay. TMAC will purchase and pay for the diesel fuel
as it is used. There are certain conditions precedent that need to be
finalized by the end of May 2018, including the finalization of an
assignment agreement with TMAC's current fuel and delivery supplier.
The Diesel Purchase Agreement will reduce the upfront cash outlay of
the 2018 sealift by approximately $21 million.
-
Reducing peak working capital is strategically and financially
impactful to TMAC given our cost of capital; Macquarie's risk
management and financing expertise in the commodities sector has been
an excellent fit with this balance sheet initiative.
Exploration:
-
A total of 4,425 metres of drilling was completed on the Doris
Connector zone ("DCO") during the three months ended March 31,
2018.
-
Drilling commenced in early April on the first block of the BTD
Extension zone and results will be released as each phase of the
program is completed.
Environment and Permitting:
-
The Nunavut Impact Review Board ("NIRB"), in consultation with
the Nunavut Water Board, accepted the final Environmental Impact
Statement ("EIS") allowing for the public and technical review
of TMAC's proposal for the development and mining of the Madrid and
Boston gold deposits to commence.
-
The NIRB's final hearing dates for the Madrid-Boston project were set
for May 8-12, 2018 in Cambridge Bay, Nunavut.
Table 1: Summary of operating and financial highlights for the period ended March 31, 2018
Description Units Three months ended
March 31, 2018 December 31, 2017 March 31, 2017
Mining:
Ore mined tonnes 82,600 53,500 29,000
Waste mined tonnes 72,300 66,100 71,300
Total mined tonnes 154,900 119,600 100,300
Average grade g/t 8.5 9.4 12.8
Contained gold ounces 22,600 16,200 12,000
Development metres 1,370 984 1,633
Processing:
Ore processed tonnes 83,600 69,600 18,900
Grade g/t 10.9 13.7 19.2
Contained gold ounces 29,220 30,700 11,690
Recovery % 71 69 70
Gold produced ounces 20,650 21,200 8,220
Gold in circuit change ounces 1,820 2,050 3,330
Gold poured ounces 18,830 19,150 4,890
Gold sold ounces 19,540 17,350 4,250
Stockpile:
Ore on surface (1) tonnes 76,100 66,600 131,600
Average grade g/t 9.3 13.8 13.4
Contained gold ounces 22,800 29,400 56,800
P&L Summary:
Revenue (ounces) ounces 19,540 17,350 -
Revenue $millions 33.0 28.2 -
Cost of sales(1) $millions 35.6 34.3 -
Profit (loss) from
mining operations $millions (2.6) (6.1) -
General and administrative $millions 4.2 4.9 3.3
Financing costs, net $millions (4.7) (4.5) 0.1
Foreign exchange gain (loss) $millions (5.8) (1.0) 1.0
Net profit (loss) $millions (15.0) (12.5) (2.4)
Per share $/share (0.16) (0.14) (0.03)
Unit Costs:
Cost of sales(2) $/oz 1,822 1,977 -
Cash Cost(3) $US/oz 1,049 1,228 -
AISC(4) $US/oz 1,807 1,683 -
(1) Includes reconciliation adjustment based on surveyed results of the stockpile
(2) Includes depreciation
(3) Refer to the definition of Cash Cost and AISC in the non-IFRS measures in the
Management's Discussion & Analysis
(4) Translated using exchange rates at the time of incurring the expenditure
TMAC expects its lowest cash balances to be in the third quarter at the
height of the sealift period. Cash flow from operating activities was
positive for the first time during the three months ended March 31,
2018; however, the underperformance of the Plant, from both a recovery
and throughput perspective, resulted in approximately $24 million less
revenue being generated than was expected from the time of the
announcement of the equity financing on October 26, 2017 through to
March 31, 2018. In addition, the cost of processing was in line with
expectations (i.e., being the same as if the Plant was running at design
capacity). The annual sealift requires significant cash reserves to be
built up in the second quarter of 2018 and it is important that
initiatives to improve Plant recoveries are successfully executed, the
Plant's throughput is successfully increased with the installation,
commissioning and ramp up of the second CL and mining operations ramp up
successfully to supply sufficient ore to the Plant.
Unit costs of production in 2018 are sensitive to grade, throughput and
recovery rates. Cash Costs in the first quarter of 2018 of US$1,049 per
ounce are lower than the Cash Costs of US$1,288 per ounce achieved in
2017. Costs for the three months ended March 31, 2018 were in line with
the costs incurred in 2017, with unit costs reducing as throughput
increases. With improvements in recovery expected in the second quarter
of 2018 combined with the increase in throughput from completing the
installation and commissioning of the second CL later in 2018, the unit
costs are expected to decline further. Maintenance costs are expected to
decline from the high levels experienced in 2017 as improvements in the
Plant are implemented.
AISC in the first quarter of 2018 of US$1,807 per ounce sold are lower
than the AISC of US$1,870 per ounce sold achieved in 2017 but higher
than the AISC of US$1,683 per ounce sold achieved in the fourth quarter
of 2017. Cash Costs for the first quarter of 2018 were in line with the
costs incurred in 2017. The change in AISC was mainly due to higher
sustaining capital expenditures incurred in the first quarter of 2018
compared with the fourth quarter of 2017, due to the timing of surface
infrastructure projects. AISC per ounce sold is expected to decrease as
production from the Plant increases. Sustaining capital relates to
underground development at Doris, expenditures related to the
construction of the south dam in the TIA and the marine outfall pipeline
that commenced in the three months ended March 31, 2018.
Exploration:
The Exploration and Geoscience programs for 2018 are designed to
support several aspects of exploration at Hope Bay ranging from
immediate production support, through advanced exploration, to the
generation of regional targets in preparation for drilling. A key
strategy of the exploration program is to develop and maintain a
project pipeline consisting of prospective exploration targets at
various stages of evaluation. Expenditures on exploration will
increase once excess cash flow is produced.
Conduct 22,000 metres of underground definition diamond drilling on
the Doris BTD Extension and DCO zones to support stope design and a
resource update to facilitate conversion to reserve.
6,500 metres of surface diamond drilling are planned to refine the
geological understanding of the Madrid North Naartok deposit to
support an advanced exploration and bulk sampling program.
Regional exploration plans include diamond drilling and gold in
glacial till sampling. A total of 4,000 metres of diamond drilling is
planned. The sonic drilling program has been cancelled due to
logistical issues with moving the drill at site.
Environment and Permitting:
Obtain a project certificate for Madrid and Boston once NIRB completes
the review of the EIS submitted in December 2017. NIRB recommends
project certificates for approval by the Minister of Crown-Indigenous
Relations Northern Affairs, formerly Indigenous and Northern Affairs
Canada (INAC).
Madrid and Boston Projects:
Management continues to pursue the opportunity to replace the cash
collateralized letters of credit issued for environmental
rehabilitation security with surety bonds. Surety bonds could release
approximately $25 million of cash currently deposited as collateral
for letters of credit as well as additional environmental reclamation
security that is expected to be placed with various entities in the
future. If surety bonds are obtained, the additional cash would allow
for the initial investment in Madrid that includes the acquisition of
equipment, the initiation of surface infrastructure and the
commencement of underground development required in 2018 to extract a
bulk sample in 2019.
Long-term planning and the development of exploration targets at
Boston are ongoing and programs will be executed as funds permit.
FINANCIAL AND CORPORATE DEVELOPMENTS
The annual resupply of diesel fuel, consumables and spare parts
inventory through the sealift requires a significant working capital
investment as TMAC has to pay for more than 70% of its annual
consumption upfront. On May 10, 2018, TMAC entered into a Diesel
Purchase Agreement with Macquarie whereby Macquarie will purchase and
deliver diesel fuel to Hope Bay and store the fuel in TMAC's tanks at
Roberts Bay.
TMAC will purchase and pay for the diesel fuel as it is used. The price
of the diesel fuel is fixed in Canadian dollars at the time of delivery
to site at the same terms as TMAC's existing fuel supply and delivery
agreement, plus an added premium.
There are certain conditions precedent that need to be finalized by the
end of May 2018 for the Diesel Purchase Agreement to come into effect,
including the finalization of an assignment agreement with TMAC's
current fuel and delivery supplier. The assignment agreement is a
partial assignment of the Diesel Supply Agreement from TMAC to
Macquarie. It is anticipated that the Diesel Purchase Agreement will
reduce the upfront cash outlay of the 2018 sealift by approximately $21
million. As the operating activities increase and the development of
Madrid and Boston commences in the future, the amount of funds invested
in working capital is expected to increase considerably, and the Diesel
Purchase Agreement provides a vehicle that will enable TMAC to manage
the levels of working capital and reduce the seasonal volatility of the
operating cash outflows.
CONFERENCE CALL AND WEBCAST
Senior management will host a conference call on Friday, May 11, 2018 at
10:00 am (ET).
In order to participate in the conference call please dial (416)
915-3239 (Toronto local or international) or 1 (800) 319-4610
for toll-free within Canada and the United States at least five minutes
prior to the scheduled start of the call. Alternatively, a live audio
webcast of the conference call will be available on-line.
An archive of the webcast will be available on the Company's website.
CONFERENCE ATTENDANCE
May 15 - 17, 2018
Jason Neal, President and Chief Executive
Officer, will present on Thursday, May 17, 2018 at 10:00 am ET at the
Bank of America Merrill Lynch 2018 Global Metals, Mining & Steel
Conference taking place in Miami, FL, United States.
SCIENTIFIC AND TECHNICAL INFORMATION
Scientific and technical information was prepared by, and all other
scientific and technical information contained in this document was
reviewed and approved by Gil Lawson, P.Eng., Chief Operating Officer of
TMAC, and David King, P.Geo., the Vice President, Exploration and
Geoscience of TMAC, each of whom is a "qualified person" as defined by
NI 43-101.
ABOUT TMAC RESOURCES
TMAC holds a 100% interest in the Hope Bay Project located in Nunavut,
Canada. TMAC is a gold producer with the Doris mine achieving commercial
production in 2017 and the Madrid and Boston deposits expected to
commence production in 2020 and 2022, respectively. The Company has a
board of directors with depth of experience and market credibility and
an exploration and development team with an extensive track record of
developing high grade, profitable underground mines.
We seek Safe Harbor.
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