Mr. Ewan Downie reports
PREMIER GOLD MINES REPORTS Q2 2019 RESULTS
Premier Gold Mines Ltd. has released operating results for the three months ended June 30, 2019. The company previously released second quarter production results on July 17, 2019.
All amounts discussed herein are denominated in U.S. dollars.
Production of 16,450 ounces of gold and 51,792 ounces of silver for the quarter, and 34,064 ounces of gold and 109,473 ounces of silver year to date;
Cash costs (1) of $1,014 per ounce of gold sold for the quarter, and $910 per ounce of gold sold year to date;
AISC (all-in sustaining costs) (1) of $1,228 per ounce of gold sold for the quarter, and $1,166 per ounce of gold sold year to date;
Revenue of $23.0-million for the quarter, and $46.1-million year to date;
Mine operating loss of $700,000 for the quarter, and mine operating income of $3.0-million year to date;
Mine development at El Nino continues to advance ahead of schedule.
Chief executive officer commentary
"With stronger production expected during the second half of the year at Mercedes, and near-term production from the ongoing construction of the El Nino and phase 1 projects at South Arturo, we look to a future highlighted by growing production and cash flow," stated Ewan Downie, president and chief executive officer. "Ongoing permitting initiatives at the Cove and Hardrock projects provide a peer-best organic growth profile complemented by a portfolio of high-potential exploration-stage assets."
Three months ended June 30, 2019
Second quarter 2019 consolidated production is 16,450 gold ounces and 51,792 silver ounces, comparable with second quarter 2018.
The company reported total revenue of $23.0-million and a mine operating loss of $700,000 during second quarter 2019 compared with revenue of $27.5-million and a mine operating loss of $1.2-million during second quarter 2018.
The slight increase in second quarter 2019 production when compared with second quarter 2018 is due to the improvement in Mercedes gold production from 13,780 to 15,532 ounces offset by the reduction in South Arturo ounces related to the planned transition from operations to development over the past year. South Arturo operations continue to transition from phase 2 open-pit mining to phase 1 open-pit and El Nino underground operations, where development is under way and production is expected in the second half of 2019.
The company continues to focus on near-term exploration and predevelopment initiatives that will support its longer-term objective of achieving increased annual production over the next several years. A total of $5.4-million in exploration and predevelopment expenses were incurred during second quarter 2019. These expenses, when factored with the mine operating loss and non-cash expenses of $2.4-million, contributed to a loss of $10.1-million reported for the quarter. A total of $12.4-million in capital expenditures were incurred during the quarter, including $5.9-million for mine development and construction at South Arturo, $1.8-million for development at McCoy-Cove, and the balance for sustaining- and expansion-related activities at Mercedes.
Six months ended June 30, 2019
A total of 34,064 ounces of gold and 109,473 ounces of silver were produced for the six months ended June 30, 2019, compared with 46,557 ounces of gold and 111,572 ounces of silver for the prior-year period.
The company reported total revenue of $46.1-million and mine operating income of $3.0-million for the six months ended June 30, 2019, compared with revenue of $66.6-million and mine operating income of $8.4-million for the prior-year period. The reduction in production, revenue and operating income, when compared with the prior-year period, is due to the hiatus in production at South Arturo.
A total of $11.5-million in exploration and predevelopment expenses were incurred during the six months ended June 30, 2019. These expenses, when factored with the mine operating income, contributed to a net loss of $10.7-million reported for the year to date. A total of $25.8-million in capital expenditures were incurred during the period, including $10.6-million for mine development and construction at South Arturo, $4.5-million for development at McCoy-Cove, and the balance for sustaining- and expansion-related activities at Mercedes.
The company closed the quarter with cash and cash equivalents of $26.4-million, inventory of 1,353 ounces of gold and 4,588 ounces of silver, and an undrawn $50-million credit facility in place.
Consolidated operating results are provided in the attached table.
SELECTED CONSOLIDATED OPERATIONAL AND FINANCIAL INFORMATION
(in millions of U.S. dollars, unless otherwise stated) (iii)
Three months ended Six months ended
June 30, June 30,
2019 2018 2019 2018
Ore milled tonnes 176,035 177,821 354,806 491,671
Gold produced ounces 16,450 16,007 34,064 46,557
Silver produced ounces 51,792 51,746 109,473 111,572
Gold sold ounces 17,358 20,642 34,878 49,917
Silver sold ounces 56,484 58,098 119,065 124,308
Average realized gold price (i, ii) $/ounce $1,283 $1,283 $1,277 $1,293
Average realized silver price (i, ii) $/ounce 15 16 15 16
Non-IFRS performance measures
Co-product cash costs per ounce of gold sold (i, ii) $/ounce 1,014 963 910 811
Co-product all-in sustaining costs
per ounce of gold sold (i,ii) $/ounce 1,228 1,088 1,166 934
Co-product cash costs per ounce of silver sold (i, ii) $/ounce 12 12 11 11
Co-product all-in sustaining costs
per ounce of silver sold (i, ii) $/ounce 15 13 14 13
Byproduct cash costs per ounce of gold sold (i, ii) $/ounce 1,005 949 895 798
Byproduct all-in sustaining costs per
ounce of gold sold (i, ii) $/ounce 1,227 1,079 1,162 924
Gold revenue m $ 22.2 26.4 44.3 64.4
Silver revenue M $ 0.8 1.1 1.8 2.3
Total revenue M $ 23.0 27.5 46.1 66.6
Mine operating income/(loss) M $ (0.7) (1.2) 3.0 8.4
Net (loss) M $ (10.1) (7.7) (11.0) (9.7)
Earnings/(loss) per share /share (0.05) (0.04) (0.05) (0.05)
EBITDA (i, ii) M $ (3.7) 0.4 0.8 9.8
Cash and cash equivalents balance M $ 26.4 67.8 26.4 67.8
Cash flow from operations M $ (3.4) (0.7) (8.2) (0.4)
Free cash flow (i, ii) M $ (15.9) (6.8) (34.0) (11.7)
Exploration, evaluation and predevelopment expense M $ 5.4 6.2 11.5 12.6
Total capital expenditures M $ 12.4 6.1 25.8 11.4
Capital expenditures -- sustaining (i, ii) M $ 2.4 1.8 6.6 3.6
Capital expenditures -- expansionary (i, ii) M $ 10.0 4.3 19.2 7.8
(i) A cautionary note regarding non-international financial reporting standard metrics
is included in the "Non-IFRS Measures" section of management's discussion and analysis.
(ii) Cash costs, all-in sustaining costs, free cash flow, EBITDA (earnings before
interest, taxes, depreciation and amortization), and sustaining and expansionary capital
expenditures, as well as average realized gold/silver price per ounce are non-IFRS
metrics and discussed in the section "Non-IFRS Measures" of management's discussion and
(iii) May not add due to rounding.
The Mercedes mine is 150 kilometres northeast of the city of Hermosillo in the state of Sonora, Mexico. Operations are exploiting low-sulphidation quartz veins and quartz veinlet stockwork for gold and silver with an ore extraction rate targeting 2,000 tonnes per day.
Mine production at Mercedes during second quarter 2019 was 15,532 ounces of gold and 51,354 ounces of silver compared with 13,780 ounces of gold and 44,366 ounces of silver during the second quarter 2018. Year to date, mine production totalled 33,146 ounces of gold and 109,035 ounces of silver compared with 28,789 ounces of gold and 101,736 ounces of silver in the prior year to date. The increased gold production is the result of higher mined grades upon transitioning to the new Rey de Oro and Lupita zones, as well as consistent stope production from the Diluvio zone. Unit operating costs at Mercedes during the period, on a co-product basis, were cash costs (1) of $1,053 and all-in sustaining costs (1) of $1,254 per ounce of gold sold, and year to date, on a co-product basis, cash costs (1) of $926 and all-in sustaining costs (1) of $1,177 per ounce of gold sold. To date, sustaining capital costs at Mercedes are $6.6-million.
Although production from Mercedes in 2019 is weighted to the second half with increased output from Diluvio planned to account for approximately half of the gold ounces produced, it is trending toward the low end of guidance and the high end of projected costs. Mining during the second half of the year will draw more heavily on the Rey de Oro and Lupita zones, where grades are higher, which should help to bring down costs.
Exploration activities continued during the quarter with a total of 11,281 metres of drilling targeting Diluvio, Marianas and Barrancas veins to replace reserves, support mine production, test extensions of the main mine trends and test new geological targets.
Capital expenditures were primarily required for exploration and underground mine development to support transition to the new mining zones. For second quarter 2019, total capital expenditures at Mercedes were $4.5-million, which includes $2.4-million of sustaining capital, $1.2-million of exploration capital and $700,000 of expansionary capital. Capital spending in the second quarter 2018 was $4.4-million.
The South Arturo mine in Nevada is a joint venture operated by Barrick Gold Corp., where mining of the phase 2 open pit has concluded and construction is under way on two new mining centres: the El Nino underground operations and the phase 1 open pit, which are expected to ramp up production in 2019 and 2020, respectively. Capital expenditures of $5.9-million were incurred during the second quarter, $10.6-million year to date, primarily for stripping for the phase 1 open-pit and underground ramp development at El Nino.
Mine development at El Nino is advancing ahead of schedule with processing of ore now expected to begin during the current quarter.
Exploration activities are focused on opportunities near existing mine infrastructure, including further refinement of a potential heap leach operation, and resource definition and expansion drilling from underground drill stations located within El Nino underground workings.
Cove and McCoy-Cove
A preliminary economic assessment (PEA) was completed for the Cove Helen-Gap deposits in the first half of 2018, including designs for underground exploration development and drilling, preliminary engineering, dewatering, environmental baseline studies, and a life-of-mine plan. During the second quarter of 2019, drilling the first of two new water wells required for groundwater modelling was completed. Pump tests, interpretation of results and groundwater modelling will be completed in the second half of the year. This work, as well as an underground exploration ramp and infill drilling, will provide critical inputs for a feasibility study.
On the ground surrounding the Cove project, Barrick continues to explore and earn in to the McCoy-Cove joint venture. Several regional targets were identified, and 1,977 metres of drilling was completed. Continuing drilling is focused on testing for mineralization in the Favret and Dixie Valley rock formations that host the deposits on the carveout lands 100 per cent owned by Premier. Drilling has intersected mineralization and alteration at several target areas, including Antenna, Lighthouse, Alpha and Windy Point.
Greenstone gold mines
The Greenstone gold property is located in Northern Ontario, Canada, approximately 275 kilometres northeast of Thunder Bay, Ont. Premier has a 50-per-cent partnership interest in the Greenstone Partnership, which owns the Greenstone gold development property, including the Hardrock deposit, that hosts mineral reserves of 4.65 million ounces of gold. Hardrock has received both federal and provincial EA (environmental assessment) approvals for the project and recently completed a two-phase drilling campaign designed to validate and derisk the 2016 feasibility study block model.
During the second quarter, the Greenstone Partnership continued to work toward updating the Hardrock open-pit resource model using the results from drilling campaigns completed in 2018 and 2019, which consisted of 38,000 metres drilled on the principal zones of the initial mine plan. The Greenstone Partnership has obtained provincial and federal environmental assessment and is in the process of submitting applications for permits.
During the second quarter and first half of 2019, the Greenstone Partnership spent $8.0-million and $14.8-million, respectively, mainly on advancing detailed engineering on infrastructure programs, on a core and reverse circulation drilling program (completed in May) and incorporating drilling results into an updated resource model, on permitting activities, and on advancing the agreements with potentially affected indigenous groups. As at June 30, 2019, Centerra's financing toward its $185-million (Canadian) commitment in the Greenstone Partnership totalled $110-million (Canadian) ($84.9-million).
Stephen McGibbon, PGeo, is the qualified person for the information contained in this press release and is a qualified person within the meaning of National Instrument 43-101. Assay samples were sent to ALS Laboratories prep facilities located in Elko, Nev., and Reno, Nev., and analysis was performed at its Vancouver, Canada, analytical facility utilizing 30-gram fire assay with an AA finish for gold and ICP-MS 48-element scan from four-acid digestion for reverse circulation and core samples. For a complete description of Premier's sample preparation, analytical methods and quality assurance/quality control procedures, refer to the technical report dated June 29, 2018 (effective date March 31, 2018), entitled "Preliminary Economic Assessment for the Cove Project, Lander County, Nevada," located on Premier's website and at SEDAR.
Second quarter financial results and conference call details
Senior management will be hosting a conference call to discuss these results at 10 a.m. EST on Aug. 7, 2019.
Details for the conference call and webcast can be found herein and will be accessible on the company's website.
Toll-free (North America): 1-888-390-0605
Conference ID: 61236542
Conference call replay
The conference call replay will be available from 1 p.m. EST on Aug. 7, 2019, until 11:59 p.m. EST on Aug. 14, 2019.
Toll-free replay call (North America): 1-888-390-0541
International replay call: 1-416-764-8677
Passcode: 236542 followed by the number sign
(1) A cautionary note regarding non-international financial reporting standard metrics is included in the "Non-IFRS Measures" section of the June 30, 2019, management's discussion and analysis.
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