0001199835-20-000190.txt : 20200806 0001199835-20-000190.hdr.sgml : 20200806 20200806160326 ACCESSION NUMBER: 0001199835-20-000190 CONFORMED SUBMISSION TYPE: 6-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20200806 FILED AS OF DATE: 20200806 DATE AS OF CHANGE: 20200806 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Pretium Resources Inc. CENTRAL INDEX KEY: 0001508844 STANDARD INDUSTRIAL CLASSIFICATION: METAL MINING [1000] IRS NUMBER: 000000000 STATE OF INCORPORATION: A1 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 6-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-35393 FILM NUMBER: 201081492 BUSINESS ADDRESS: STREET 1: SUITE 2300, 1055 DUNSMUIR STREET STREET 2: PO BOX 49334 CITY: VANCOUVER STATE: A1 ZIP: V7X 1L4 BUSINESS PHONE: 604-558-1784 MAIL ADDRESS: STREET 1: SUITE 2300, 1055 DUNSMUIR STREET STREET 2: PO BOX 49334 CITY: VANCOUVER STATE: A1 ZIP: V7X 1L4 6-K 1 form-6k.htm PRETIUM RESOURCES, INC. 6-K
 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 6-K

 

Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934

 

For the month of August 2020

 

Commission File Number: 001-35393

 

PRETIUM RESOURCES INC

 

(translation of registrant’s name into English)

 

1055 Dunsmuir Street, Suite 2300
Vancouver, British Columbia
Canada V7X 1L4

 

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 

Form 20-F o Form 40-F x

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

 

Yes o No x

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 

Yes o No x

1

 

Exhibit Index 

 

Exhibit
Number
Description of Exhibit
99.1 Condensed Consolidated Interim Financial Statements for the Three and Six Months Ended June 30, 2020 and 2019
99.2 Management’s Discussion and Analysis for the Three and Six Months Ended June 30, 2020 and 2019
99.3 News Release dated August 5, 2020

 

Incorporation by Reference

 

The Registrant’s Condensed Consolidated Interim Financial Statements for the Three and Six Months Ended June 30, 2020 and 2019, included as Exhibit 99.1 of this Form 6-K and the Management’s Discussion and Analysis for the Three and Six Months Ended June 30, 2020 and 2019, included as Exhibit 99.2 of this Form 6-K, furnished to the Commission on August 6, 2020, are incorporated by reference into the Registration Statements on Form S-8 (Commission File Nos. 333-203409 and 333-213450), and Form F-10 (Commission File No. 333-239214) of the Registrant, Pretium Resources Inc.

2

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  PRETIUM RESOURCES INC.
     
  By: /s/ Vlada Cvijetinovic
Date: August 6, 2020 Name: Vlada Cvijetinovic 
  Title: Vice President, Legal

3

EX-99.1 2 ex99-1.htm CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019
 

 

Exhibit 99.1

 

(PRETIVM LOGO)

 

 

 

 

 

 

 

 

PRETIUM RESOURCES INC.

 

 

 

 

 

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED

JUNE 30, 2020 AND 2019

(Expressed in thousands of United States Dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

Suite 2300, Four Bentall Centre

1055 Dunsmuir Street, PO Box 49334
Vancouver, BC V7X 1L4

Phone: 604-558-1784
Email: invest@pretivm.com

 

 

PRETIUM RESOURCES INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
(Unaudited - Expressed in thousands of United States dollars)

 

       June 30,   December 31, 
   Note   2020   2019 
ASSETS              
               
Current assets              
Cash and cash equivalents      $124,734   $23,174 
Receivables and other  3    13,257    17,431 
Inventories  4    19,464    21,945 
        157,455    62,550 
Non-current assets              
Mineral properties, plant and equipment  5    1,466,648    1,500,512 
Restricted cash       51    54 
Deferred income tax asset       10,050    10,051 
Total assets      $1,634,204   $1,573,167 
LIABILITIES              
               
Current liabilities              
Accounts payable and accrued liabilities  6   $58,489   $62,688 
Current portion of long-term debt  7    66,667    66,667 
        125,156    129,355 
Non-current liabilities              
Other liabilities  6    6,029    8,932 
Long-term debt  7    382,763    397,253 
Decommissioning and restoration provision  8    23,585    21,239 
Deferred income tax liability       95,689    62,086 
        633,222    618,865 
EQUITY              
               
Share capital  12    1,163,624    1,152,567 
Other reserves  12    (131,800)   (128,926)
Deficit       (30,842)   (69,339)
        1,000,982    954,302 
Total liabilities and equity      $1,634,204   $1,573,167 
Contingencies  15           

 

On behalf of the Board of Directors:

     

“David S. Smith”
 
“Richard T. O’Brien”
 

David S. Smith

(Chair of the Audit Committee)

 

Richard T. O’Brien

(Chair of the Board)

 

 

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

2

 

PRETIUM RESOURCES INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS
(Unaudited - Expressed in thousands of United States dollars, except for share data)

 

      For the three months ended   For the six months ended 
      June 30,   June 30,   June 30,   June 30, 
   Note  2020   2019   2020   2019 
                    
Revenue  9  $166,567   $113,202   $293,127   $216,321 
                        
Cost of sales  10   106,555    83,413    196,060    157,380 
                        
Earnings from mine operations      60,012    29,789    97,067    58,941 
                        
Corporate administrative costs      4,822    4,305    10,398    8,272 
                        
Operating earnings      55,190    25,484    86,669    50,669 
                        
Interest and finance expense  11   (4,685)   (8,782)   (12,407)   (18,182)
Loss on financial instruments at fair value      -    (3,467)   -    (10,993)
Interest and finance income      269    236    359    523 
Foreign exchange gain (loss)      (596)   (379)   502    (695)
                        
Earnings before taxes      50,178    13,092    75,123    21,322 
                        
Current income tax expense      (1,592)   (1,051)   (2,919)   (1,977)
Deferred income tax expense      (16,326)   (1,598)   (33,707)   (4,736)
                        
Net earnings and comprehensive earnings for the period     $32,260   $10,443   $38,497   $14,609 
Earnings per common share                       
Basic     $0.18   $0.06   $0.21   $0.08 
Diluted  12  $0.18   $0.06   $0.21   $0.08 
                        
Weighted average number of common shares outstanding                       
Basic      186,085,641    184,400,998    185,744,251    184,297,426 
Diluted  12   186,637,092    185,488,424    186,414,313    185,335,409 

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements

3

 

PRETIUM RESOURCES INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(Unaudited - Expressed in thousands of United States dollars)

 

      For the three months ended   For the six months ended 
      June 30,   June 30,   June 30,   June 30, 
   Note  2020   2019   2020   2019 
CASH FLOWS FROM OPERATING ACTIVITIES                       
Net earnings for the period     $32,260   $10,443   $38,497   $14,609 
Items not affecting cash:                       
Current income tax expense      1,592    1,051    2,919    1,977 
Deferred income tax expense      16,326    1,598    33,707    4,736 
Depreciation and depletion      32,843    20,842    57,619    37,026 
Interest and finance expense, net      4,317    8,583    11,850    17,790 
Loss on disposal of plant and equipment           10    -    10 
Loss on financial instruments at fair value      -    3,467    -    10,993 
Settlement of offtake obligation      -    (904)   -    (1,744)
Share-based compensation expense      1,845    2,311    785    3,829 
Unrealized foreign exchange (gain) loss      382    780    (382)   1,197 
Changes in non-cash working capital items:                       
Receivables and other      (1,622)   (10,317)   3,869    (8,427)
Inventories      3,599    371    1,593    (1,551)
Accounts payable and accrued liabilities      2,315    3,999    (2,768)   2,659 
Income taxes paid      (1,726)   (1,051)   (3,020)   (1,977)
Net cash generated by operating activities      92,131    41,183    144,669    81,127 
CASH FLOWS FROM FINANCING ACTIVITIES                       
Payment of lease obligations      (1,469)   (1,628)   (3,083)   (3,184)
Proceeds from exercise of share options      6,052    2,018    7,061    2,278 
Proceeds from borrowing on loan facility  7   16,000    -    16,000    - 
Repayment of loan facility  7   (16,666)   (44,667)   (33,333)   (64,667)
Transaction costs associated with loan facility      -    (100)   -    (267)
Interest paid      (3,244)   (6,893)   (8,913)   (15,289)
Net cash (used in) generated by financing activities      673    (51,270)   (22,268)   (81,129)
CASH FLOWS FROM INVESTING ACTIVITIES                       
Expenditures on mineral properties, plant and equipment      (9,653)   (7,290)   (20,478)   (12,685)
Restricted cash      -    227    -    410 
Interest received      269    236    359    523 
Net cash used in investing activities      (9,384)   (6,827)   (20,119)   (11,752)
                        
Increase (decrease) in cash and cash equivalents for the period      83,420    (16,914)   102,282    (11,754)
Cash and cash equivalents, beginning of the period      40,566    50,868    23,174    45,407 
Effect of foreign exchange rate changes on cash and cash equivalents      748    327    (722)   628 
Cash and cash equivalents, end of the period     $124,734   $34,281   $124,734   $34,281 

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

4

 

PRETIUM RESOURCES INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY
(Unaudited - Expressed in thousands of United States dollars, except for share data)

 

      Number of                 
      common   Share   Other         
   Note  shares   capital   reserves   Deficit   Total 
Balance - December 31, 2018      184,163,091   $1,140,890   $(127,508)  $(110,256)  $903,126 
Shares issued upon exercise of options  12   405,825    3,336    (1,058)   -    2,278 
Value assigned to options vested  12   -    -    1,413    -    1,413 
Earnings for the period      -    -    -    14,609    14,609 
Balance - June 30, 2019      184,568,916   $1,144,226   $(127,153)  $(95,647)  $921,426 
                             
Balance - December 31, 2019      185,372,800   $1,152,567   $(128,926)  $(69,339)  $954,302 
Shares issued upon exercise of options  12   1,276,976    10,881    (3,561)   -    7,320 
Value assigned to options vested  12   -    -    687    -    687 
Shares issued upon settlement of restricted share units  12   21,444    176    -    -    176 
Earnings for the period      -    -    -    38,497    38,497 
Balance - June 30, 2020      186,671,220   $1,163,624   $(131,800)  $(30,842)  $1,000,982 

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

5

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2020 and 2019
(Expressed in thousands of United States dollars, except for share data)

 

1.NATURE OF OPERATIONS

 

Pretium Resources Inc. (the “Company”) was incorporated under the laws of the Province of British Columbia, Canada on October 22, 2010. The address of the Company’s registered office is Suite 2300, Four Bentall Centre, 1055 Dunsmuir Street, PO Box 49334, Vancouver, BC, V7X 1L4.

 

The Company was formed for the acquisition, exploration, development and operation of precious metal resource properties in the Americas. The Company’s primary asset is its wholly-owned underground Brucejack Mine located in northwestern British Columbia.

 

2.SIGNIFICANT ACCOUNTING POLICIES

 

(a)Statement of compliance

 

These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting using accounting policies consistent with International Financial Reporting Standards as issued by the International Accounting Standards Board and interpretations of the International Financial Reporting Standards Interpretations Committee.

 

The Company’s significant accounting policies applied in these condensed consolidated interim financial statements are the same as those applied in note 3 of the Company’s annual consolidated financial statements as at and for the years ended December 31, 2019 and 2018. These condensed consolidated interim financial statements should be read in conjunction with the Company’s most recent annual consolidated financial statements.

 

As at June 30, 2020, the Company has cash and cash equivalents of $124,734 and positive working capital (current assets less current liabilities) of $32,299. Based on management’s cash flow projections, the Company expects that future operating and debt settlement requirements will be satisfied from operating cash flows. Management continues to closely monitor developments in the novel coronavirus (“COVID-19”) pandemic, including the potential impact on the Company’s operations and its liquidity. The impact of COVID-19 is uncertain, and COVID-19 could have a significant impact on production and liquidity if the Company or its suppliers or customers are not able to maintain operations.

 

These condensed consolidated interim financial statements are presented in United States dollars (“USD”), which is the Company’s functional currency. All dollar amounts are expressed in thousands of USD, except for share data, unless otherwise noted as Canadian dollars (“CAD” or “C”).

 

These condensed consolidated interim financial statements were authorized for issue by the Board of Directors on August 5, 2020.

 

3.RECEIVABLES AND OTHER

 

   June 30,   December 31, 
   2020   2019 
Trade receivables  $10,252   $6,210 
Prepayments and deposits   1,807    3,109 
Tax receivables   797    1,652 
Other receivables   401    19 
BC Mineral Exploration Tax Credit receivable   -    6,441 
   $13,257   $17,431 

6

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2020 and 2019
(Expressed in thousands of United States dollars, except for share data)

 

4.INVENTORIES

 

   June 30,   December 31, 
   2020   2019 
Materials and supplies  $14,332   $13,403 
Finished metal   4,012    8,213 
In-circuit   1,120    329 
   $19,464   $21,945 

 

As at June 30, 2020, depreciation and depletion of $1,529 (2019 – $2,500) and site share-based compensation of $78 (2019 – $69) was included in inventory.

 

5.MINERAL PROPERTIES, PLANT AND EQUIPMENT

 

   Mineral   Construction   Plant and       Exploration and     
   properties   in progress   equipment   ROU assets   evaluation assets   Total 
Cost                        
Balance - December 31, 2019  $808,689   $25,378   $573,247   $19,300   $262,578   $1,689,192 
Additions   -    17,627    2,766    221    2,393    23,007 
Transfer from construction in progress to plant and equipment   -    (13,708)   13,708    -    -    - 
Transfer from construction in progress to mineral properties   354    (354)   -    -    -    - 
Transfer from inventory to plant and equipment   -    -    232    -    -    232 
Transfer from construction in progress to ROU assets   -    (15)   -    15    -    - 
Lease modifications   -    -    -    (482)   -    (482)
Balance - June 30, 2020  $809,043   $28,928   $589,953   $19,054   $264,971   $1,711,949 
Accumulated depreciation and depletion                              
Balance - December 31, 2019  $92,870   $-   $90,393   $5,417   $-   $188,680 
Depreciation and depletion   30,706    -    23,254    2,688    -    56,648 
Lease modifications   -    -    -    (27)   -    (27)
Balance - June 30, 2020  $123,576   $-   $113,647   $8,078   $-   $245,301 
                               
Net book value - June 30, 2020  $685,467   $28,928   $476,306   $10,976   $264,971   $1,466,648 

 

(a)Depreciation and depletion

 

For the six months ended June 30, 2020, $56,648 (2019 – $37,595) of depreciation and depletion was recognized in the statement of earnings.

7

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2020 and 2019
(Expressed in thousands of United States dollars, except for share data)

 

6.ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

 

   June 30,   December 31, 
   2020   2019 
Trade payables  $38,196   $36,253 
Lease obligations   10,515    14,118 
Accrued liabilities   9,682    9,242 
Restricted share unit (“RSU”) liability   2,218    3,811 
Deferred share unit (“DSU”) liability   2,016    1,745 
Royalty payable   1,234    1,142 
Accrued interest on convertible notes   654    660 
Accrued interest on loan facility   3    29 
Employee benefit liability   -    4,620 
   $64,518   $71,620 
Non-current portion of lease obligations   (5,132)   (8,130)
Non-current portion of RSU liability   (897)   (802)
Current portion of accounts payable and accrued liabilities  $58,489   $62,688 

 

(a)Lease obligations

 

As at June 30, 2020, the Company’s undiscounted lease obligations consisted of the following:

 

   June 30,   December 31, 
   2020   2019 
Gross lease obligation - minimum lease payments          
1 year  $5,816   $6,549 
2-3 years   4,439    6,689 
4-5 years   1,021    1,849 
   $11,276   $15,087 
Future interest expense on lease obligations   (761)   (969)
   $10,515   $14,118 

 

For the six months ended June 30, 2020, interest expense on lease obligations was $328 (2019 – $392). Total cash payments on lease obligations and short-term leases were $3,083 (2019 – $3,184) and $335 (2019 - $496), respectively.

 

8

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2020 and 2019
(Expressed in thousands of United States dollars, except for share data)

 

7.LONG-TERM DEBT

 

As at June 30, 2020, the Company’s long-term debt consisted of the following:

 

               Total 
   Term   Revolving   Convertible   long-term 
   facility   facility   notes   debt 
Balance - December 31, 2019  $197,763   $178,439   $87,718   $463,920 
Accretion of convertible notes   -    -    2,777    2,777 
Proceeds from borrowing on revolver facility   -    16,000         16,000 
Repayment of loan facility   (33,333)   -    -    (33,333)
Amortization of loan facility transaction costs   310    (244)   -    66 
Balance - June 30, 2020  $164,740   $194,195   $90,495   $449,430 
Current portion of long-term debt   (66,667)   -    -    (66,667)
Non-current portion of long-term debt  $98,073   $194,195   $90,495   $382,763 

 

(a)Senior secured loan facility

 

On December 18, 2018, the Company closed a $480,000 senior secured loan facility (the “loan facility”) with a syndicate of financial institutions arranged by The Bank of Nova Scotia, ING Capital LLC and SG Americas Securities, LLC. The loan facility consists of a $250,000 senior secured amortizing non-revolving credit facility (the “term facility”) and a $230,000 senior secured revolving credit facility (the “revolving facility”). The loan facility is secured by substantially all of the assets of the Company and its subsidiaries.

 

The term of the loan facility is four years, maturing on December 18, 2022. The undrawn portion of the loan facility at June 30, 2020 was $459 with $1,541 (C$2,100) used for a letter of credit supporting a reclamation deposit requirement. During the second quarter, to increase available liquidity due to COVID-19, the Company drew down $16,000 of the available revolving facility.

 

Each borrowing under the term and revolving facilities is available by way of USD London Inter-Bank Offered Rate (“LIBOR”) loans or USD base rate loans. The revolving facility is also available in various other forms, including Canadian prime loans, bankers’ acceptances, bankers’ acceptance equivalent loans, and letters of credit.

 

Borrowings comprising USD LIBOR loans shall bear interest at LIBOR plus an applicable margin of 2.5% to 3.5% based on the Company’s net leverage ratio. As at June 30, 2020, the LIBOR on the Company’s borrowings was 0.2%. Borrowings comprising USD base rate loans shall bear interest at the administrative agent’s base rate plus an applicable margin of 1.5% to 2.5% based on the Company’s net leverage ratio. Interest is payable on the last day of the interest period related to a borrowing. For the six months ended June 30, 2020, $7,761 (2019 – $13,339) of interest expense was included in interest and finance expense in the statement of earnings.

 

The term facility is required to be repaid in equal installments of principal until maturity. The Company paid the two quarterly installments on the term facility in the amount of $33,333 (2019 – $16,667), reducing the outstanding balance on the term facility to $166,667.

 

The remaining principal of the revolving facility is required to be repaid as a bullet payment in full on the maturity date. Any unused portion of the revolving facility is subject to a standby fee of 0.6% to 0.8%. The outstanding principal balance on the revolving facility is $198,000.

9

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2020 and 2019
(Expressed in thousands of United States dollars, except for share data)

 

7.LONG-TERM DEBT (Cont’d)

 

Transaction costs associated with the term facility were $3,243 (2019 – $3,243) and the revolving facility were $4,639 (2019 – $4,639). The transaction costs have been recorded as a loan discount and will be amortized over the term of the loan. For the six months ended June 30, 2020, $66 (2019 – $441) of amortization of the loan facility transaction costs were expensed to interest and finance expense in the statement of earnings.

 

The effective interest rate for the loan facility as at June 30, 2020 is 3.6%. The Company is subject to financial covenants including interest coverage ratio, leverage ratio, tangible net worth and minimum liquidity under the terms of the loan facility. As at June 30, 2020, the Company was compliant with all financial and non-financial covenants.

 

8.DECOMMISSIONING AND RESTORATION PROVISION

 

The Company has a liability for remediation of current and past disturbances associated with the exploration, development and production activities at the Brucejack Mine. The decommissioning and restoration provision is as follows:

 

   For the six months ended   For the year ended 
   June 30,   December 31, 
   2020   2019 
Opening balance  $21,239   $18,947 
Change in discount rate   2,360    2,028 
Accretion of decommissioning and restoration provision   158    446 
Settlement of decommissioning and restoration provision   -    (49)
Change in amount and timing of cash flows   (172)   (133)
Ending balance  $23,585   $21,239 

 

For the six months ended June 30, 2020, the provision increased due to a decrease in the discount rate. The Company used an inflation rate of 1.7% (2019 – 1.7%) and a real discount rate of 0.7% (2019 – 1.5%) in calculating the estimated obligation. The liability for retirement and remediation on an undiscounted basis before inflation is $20,096 (C$27,386) (2019 – $21,086 (C$27,386)). Most of the expected expenditures to settle the decommissioning and restoration provision are anticipated to occur after the end of the current mine life in 2032.

10

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2020 and 2019
(Expressed in thousands of United States dollars, except for share data)

 

9.REVENUE

 

Revenue by metal was:

 

   For the three months ended   For the six months ended 
   June 30,   June 30,   June 30,   June 30, 
   2020   2019   2020   2019 
Gold revenue  $163,256   $107,644   $288,378   $210,002 
Silver revenue   1,432    1,490    3,244    2,958 
Revenue from contracts with customers  $164,688   $109,134   $291,622   $212,960 
Gain on trade receivables at fair value   1,879    4,068    1,505    3,361 
   $166,567   $113,202   $293,127   $216,321 

 

Revenue from contracts with customers by product was:

 

   For the three months ended   For the six months ended 
   June 30,   June 30,   June 30,   June 30, 
   2020   2019   2020   2019 
Gold revenue - doré  $114,267   $71,440   $198,642   $141,302 
Gold revenue - concentrate   48,989    36,204    89,736    68,700 
Silver revenue - concentrate   962    1,124    2,072    1,966 
Silver revenue - doré   470    366    1,172    992 
   $164,688   $109,134   $291,622   $212,960 

 

10.COST OF SALES

 

Total cost of sales were:

 

   For the three months ended   For the six months ended 
   June 30,   June 30,   June 30,   June 30, 
   2020   2019   2020   2019 
Production costs  $64,189   $55,961   $125,877    108,970 
Depreciation and depletion   29,431    21,459    56,243    37,310 
Royalties and selling costs   5,196    4,688    10,176    9,092 
Change in inventories   7,046    397    3,410    387 
Site share-based compensation   693    898    354    1,611 
Loss on disposal of plant and equipment   -    10    -    10 
   $106,555   $83,413   $196,060   $157,380 

11

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2020 and 2019
(Expressed in thousands of United States dollars, except for share data)

 

10.COST OF SALES (Cont’d)

 

Production costs by nature of expense were:

 

   For the three months ended   For the six months ended 
   June 30,   June 30,   June 30,   June 30, 
   2020   2019   2020   2019 
Consultants and contractors  $23,607   $23,871   $46,670   $44,784 
Salaries and benefits   21,386    15,553    40,770    30,834 
Supplies and consumables   10,550    8,716    19,554    16,780 
Energy   2,856    2,648    7,424    6,032 
Travel and camp accommodation   3,116    1,550    5,456    3,455 
Camp administrative costs   988    1,664    2,347    2,825 
Freight   1,012    1,218    2,100    2,824 
Insurance   433    377    887    733 
Rentals   241    364    669    703 
   $64,189   $55,961   $125,877   $108,970 

 

11.INTEREST AND FINANCE EXPENSE

 

   For the three months ended   For the six months ended 
   June 30,   June 30,   June 30,   June 30, 
   2020   2019   2020   2019 
Interest expense on loan facility  $2,429   $6,502   $7,827   $13,780 
Interest expense on convertible notes   1,948    1,949    3,896    3,877 
Interest expense on leases   140    248    328    392 
Other interest expense (income)   99    (37)   198    (131)
Accretion of decommissioning and restoration provision   69    120    158    264 
   $4,685   $8,782   $12,407   $18,182 

12

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2020 and 2019
(Expressed in thousands of United States dollars, except for share data)

 

12.CAPITAL AND RESERVES

 

(a)Share capital

 

At June 30, 2020, the authorized share capital consisted of an unlimited number of common shares without par value and an unlimited number of preferred shares with no par value.

 

(b)Other reserves

 

As at June 30, 2020, the Company’s other reserves consisted of the following:

 

       Equity   Accumulated     
       component of   other   Total 
   Contributed   convertible   comprehensive   other 
   surplus   notes   loss   reserves 
Balance - December 31, 2019  $47,468   $17,603   $(193,997)  $(128,926)
Shares issued upon exercise of options   (3,561)   -    -    (3,561)
Value assigned to options vested   687    -    -    687 
Balance - June 30, 2020  $44,594   $17,603   $(193,997)  $(131,800)

 

(c)Share options

 

The following table summarizes the changes in share options for the six months ended June 30:

 

   2020   2019 
       Weighted       Weighted 
       average       average 
   Number of   exercise price   Number of   exercise price 
   options   (in CAD)   options   (in CAD) 
Outstanding, January 1,   3,468,310   $10.01    4,562,919   $9.47 
Exercised   (1,276,976)   7.99    (405,825)   7.50 
Expired   (73,568)   10.92    (5,100)   12.97 
Forfeited   (34,795)   10.99    (9,900)   12.97 
Outstanding, June 30,   2,082,971   $11.19    4,142,094   $9.54 

13

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2020 and 2019
(Expressed in thousands of United States dollars, except for share data)

 

12.CAPITAL AND RESERVES (Cont’d)

 

For options exercised during the period, the related weighted average share price at the time of exercise was C$11.88 (2019 – C$11.44).

 

The following table summarizes information about share options outstanding and exercisable at June 30, 2020:

 

   Share options outstanding   Share options exercisable 
               Weighted 
   Number of   Weighted   Number of   average 
   options   average years   options   exercise price 
Exercise prices (in CAD)  outstanding   to expiry   exercisable   (in CAD) 
$6.00 - $7.99   316,250    0.51    316,250   $7.11 
$8.00 - $9.99   553,380    2.58    310,586    9.74 
$10.00 - $11.99   78,000    1.55    51,600    10.75 
$12.00 - $13.99   1,030,341    2.55    633,619    12.99 
$14.00 - $15.99   105,000    3.38    25,000    15.17 
    2,082,971    2.25    1,337,055   $10.80 

 

The total share-based compensation expense for the six months ended June 30, 2020 was $687 (2019 – $1,413), which was expensed in the statement of earnings as share-based compensation.

 

(d)RSU’s

 

The following table summarizes the changes in RSU’s for the six months ended June 30:

 

   2020   2019 
       Weighted       Weighted 
   Number of   average fair   Number of   average fair 
   RSU’s   value (in CAD)   RSU’s   value (in CAD) 
Outstanding, January 1,   404,523   $14.44    741,886   $11.31 
Granted   450,483    11.89    -    - 
Settled   (120,407)   13.87    -    - 
Forfeited   (55,207)   11.68    (22,172)   10.97 
Outstanding, June 30,   679,392   $11.20    719,714   $13.24 

 

At June 30, 2020, a liability of $1,743 (2019 – $2,887) was outstanding and included in accounts payable and accrued liabilities. For the six months ended June 30, 2020, $199 (2019 – $2,077) was expensed in the statement of earnings as share-based compensation.

14

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2020 and 2019
(Expressed in thousands of United States dollars, except for share data)

 

12.CAPITAL AND RESERVES (Cont’d)

 

(e)Performance share units (“PSU’s”)

 

The following table summarizes the changes in PSU’s for the six months ended June 30:

 

   2020   2019 
       Weighted       Weighted 
   Number of   average fair   Number of   average fair 
   PSU’s   value (in CAD)   PSU’s   value (in CAD) 
Outstanding, January 1,   166,085   $14.44    166,085   $11.31 
Granted   202,628    11.89    -    - 
Forfeited   (67,576)   11.57    -    - 
Outstanding, June 30,   301,137   $11.20    166,085   $13.24 

 

At June 30, 2020, a liability of $475 (2019 – $924) was outstanding and included in accounts payable and accrued liabilities. For the six months ended June 30, 2020, due to a decline in the Company’s share price and the forfeiture of PSU’s in the period, a recovery of $406 (2019 – expense of $312) was recognized in the statement of earnings as share-based compensation.

 

(f)DSU’s

 

The following table summarizes the changes in DSU’s for the six months ended June 30:

 

   2020   2019 
       Weighted       Weighted 
   Number of   average fair   Number of   average fair 
   DSU’s   value (in CAD)   DSU’s   value (in CAD) 
Outstanding, January 1,   156,825   $14.45    117,587   $11.57 
Granted   85,046    11.89    -    - 
Outstanding, June 30,   241,871   $11.36    117,587   $13.09 

 

At June 30, 2020, a liability of $2,016 (2019 – $1,745) was outstanding and included in accounts payable and accrued liabilities. For the six months ended June 30, 2020, $314 (2019 – $135) was expensed in the statement of earnings as share-based compensation.

 

(g)Earnings per share

 

The calculation of diluted earnings per share was based on earnings attributable to ordinary shareholders and the weighted-average number of shares outstanding after adjustments for the effect of potential dilutive shares. For the six months ended June 30, 2020, potential share issuances arising from the exercise of share options and the settlement of RSU’s and PSU’s in common shares were included in the calculation of diluted weighted average shares outstanding as well as their impact on earnings attributable to shareholders of the Company. Potentially dilutive shares associated with the convertible notes and share options (out of the money) were not included in the diluted earnings per share calculation as their effect was anti-dilutive.

 

15

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2020 and 2019
(Expressed in thousands of United States dollars, except for share data)

 

12.CAPITAL AND RESERVES (Cont’d)

 

The following table summarizes the calculation of basic and diluted earnings per share:

 

   For the three months ended   For the six months ended 
   June 30,   June 30,   June 30,   June 30, 
   2020   2019   2020   2019 
Net earnings for the period  $32,260   $10,443   $38,497   $14,609 
Basic weighted average number of common shares outstanding   186,085,641    184,400,998    185,744,251    184,297,426 
Effective impact of dilutive securities:                    
Share options   358,778    872,136    477,389    822,693 
RSU’s   192,673    215,290    192,673    215,290 
Diluted weighted average number of common shares outstanding   186,637,092    185,488,424    186,414,313    185,335,409 
Earnings per share                    
Basic  $0.18   $0.06   $0.21   $0.08 
Diluted  $0.18   $0.06   $0.21   $0.08 

 

13.RELATED PARTIES

 

Transactions with key management

 

Key management includes the Company’s directors (executive and non-executive) and executive officers including its President and Chief Executive Officer (“CEO”), its Executive Vice President and Chief Financial Officer, its Vice President, Operations (“VP Ops”), its Executive Vice President, Corporate Affairs and Sustainability, and its Vice President and Chief Exploration Officer.

 

Directors and key management compensation:

 

   For the six months ended 
   June 30,   June 30, 
   2020   2019 
Salaries and benefits  $4,446   $955 
Termination costs   2,234    - 
Share-based compensation   285    2,273 
   $6,965   $3,228 

 

Salaries and benefits includes $1,642 (C$2,224) associated with the resignation of the VP Ops in accordance with his employment agreement. These costs were recorded to production costs in the statement of earnings.

 

Termination costs include $2,234 (C$3,170) associated with the departure of the former President and Chief Executive Officer. These costs were recorded to corporate administrative costs in the statement of earnings and were paid on April 30, 2020.

 

 

16

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2020 and 2019
(Expressed in thousands of United States dollars, except for share data)

 

14.FINANCIAL RISK MANAGEMENT

 

The Company’s financial assets and liabilities are measured and recognized according to a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs.

 

The Company’s financial assets and liabilities are classified based on the lowest level of input significant to the fair value measurement based on the fair value hierarchy below:

 

Level1: Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

 

Level2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

 

Level3: Inputs for the asset or liability that are not based on observable market data

 

The carrying values of cash and cash equivalents, non-trade receivables and other, restricted cash, accounts payable and accrued liabilities and lease obligations approximate their fair values due to the short-term maturity of these financial instruments. The loan facility also approximates fair value due to the floating rate basis of the interest charges on the loans.


 

The following tables present the Company’s financial assets and liabilities by level within the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

 

As at June 30, 2020  Carrying value   Fair value 
       Amortized             
   FVTPL   cost   Level 1   Level 2   Level 3 
Financial assets                         
Cash and cash equivalents  $-   $124,734   $-   $-   $- 
Trade receivables   10,252    -    -    10,252    - 
Non-trade receivables and other   -    3,005    -    -    - 
Restricted cash   -    51    -    -    - 
   $10,252   $127,790   $-   $10,252   $- 
                          
Financial liabilities                         
Accounts payable and accrued liabilities  $-   $49,766   $-   $-   $- 
Lease obligations   -    10,515    -    -    - 
RSU liability   2,218    -    -    2,218    - 
DSU liability   2,016    -    -    2,016    - 
Loan facility   -    358,935    -    -    - 
Debt portion of convertible note   -    90,495    -    90,495    - 
   $4,234   $509,711   $-   $94,729   $- 

17

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2020 and 2019
(Expressed in thousands of United States dollars, except for share data)

 

14.FINANCIAL RISK MANAGEMENT (Cont’d)

 

As at December 31, 2019  Carrying value   Fair value 
       Amortized             
   FVTPL   cost   Level 1   Level 2   Level 3 
Financial assets                         
Cash and cash equivalents  $-   $23,174   $-   $-   $- 
Trade receivables   6,210    -    -    6,210    - 
Non-trade receivables and other   -    11,221    -    -    - 
Restricted cash   -    54    -    -    - 
   $6,210   $34,449   $-   $6,210   $- 
                          
Financial liabilities                         
Accounts payable and accrued liabilities  $-   $47,297   $-   $-   $- 
Lease obligations   -    14,118    -    -    - 
RSU liability   3,811    -    -    3,811    - 
DSU liability   1,745    -    -    1,745    - 
Loan facility   -    376,202    -    -    - 
Debt portion of convertible note   -    87,718    -    87,718    - 
   $5,556   $525,335   $-   $93,274   $- 

 

15.CONTINGENCIES

 

The Company is involved in various claims, litigation and other matters in the ordinary course and conduct of business. Some of these pending matters will take a number of years to resolve. While it is not possible to determine the ultimate outcome of such actions at this time, and inherent uncertainties exist in predicting such outcomes, it is the Company’s belief that the ultimate resolution of such actions is not reasonably likely to have a material adverse effect on its consolidated financial position or results of operations.

 

(a)Canadian class action

 

On October 29, 2013, David Wong, a shareholder of the Company, filed a proposed class action claim (the “Wong Action”) against the Company, Robert Quartermain (a director, and the President and the CEO of the Company at such time) and Snowden Mining Industry Consultants Ltd. (“Snowden”). The Wong Action was filed in the Ontario Superior Court of Justice.

 

The Wong Action alleges that the price of the Company’s shares on the TSX and NYSE suffered a significant drop in value following the announcement on October 9, 2013 of the resignation of Strathcona Mineral Services Ltd. (“Strathcona”), the consultant responsible for overseeing and reporting on the 10,000-tonne bulk sample, and the announcement of Strathcona’s reasons for resigning on October 22, 2013.

 

The Wong Action claims C$60,000 in general damages on behalf of a class of persons who acquired the Company’s securities between July 23, 2013 and October 21, 2013. Snowden is no longer a defendant in the Wong Action.

18

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2020 and 2019
(Expressed in thousands of United States dollars, except for share data)

 

15.CONTINGENCIES (Cont’d)

 

The plaintiff in the Wong Action brought a motion for leave to commence an action under the secondary market provisions in Part XXIII.1 of the Ontario Securities Act. The motion was heard on May 29 and 30, 2017. The Court allowed the plaintiff’s motion on July 20, 2017. The Company was denied leave to appeal this decision. The Company and Robert Quartermain consented to, and on January 23, 2019 the Court granted, an order certifying the Wong Action as a class proceeding pursuant to the Class Proceedings Act (Ontario). The Company and Robert Quartermain have moved for summary judgment to dismiss the Wong Action and the motion for summary judgment is scheduled to be heard in the fourth quarter of 2020. Recently, the plaintiff brought a motion to amend the statement of claim to plead additional misrepresentations. On July 22, 2020, the Court refused to permit these new allegations. The plaintiff has indicated that they will appeal this decision.

 

The Company believes that the allegations made against it in the Wong Action are meritless and will vigorously defend them, although no assurance can be given with respect to the ultimate outcome. The Company has not accrued any amounts for this action.

 

(b)United States class action

 

Two putative class action complaints were filed against the Company and certain of its officers in the United States District Court for the Southern District of New York, one on September 7, 2018 and the other on October 19, 2018. The complaints were filed on behalf of an alleged class of all persons and entities who purchased or acquired shares of the Company between July 21, 2016 and September 6, 2018, and relate to public disclosures of the Company made between July 2016 and September 2018 regarding the Brucejack Mine.

 

On April 8, 2019, the United States District Court for the Southern District of New York issued an order granting Aurico Gold Fund LP’s motion to consolidate the two cases under the case caption “In re Pretium Resources, Inc. Securities Litigation” (the “Aurico Action”), appoint itself as lead plaintiff, and approve lead plaintiff’s selection of counsel. On June 21, 2019, the plaintiffs in the Aurico Action filed a Consolidated Amended Class Action Complaint. The Company has retained legal counsel in connection with these matters and on August 27, 2019, filed its memorandum of law in support of its motion to dismiss the Aurico Action. The plaintiffs filed their opposition to the Company’s motion to dismiss on October 28, 2019 and the Company filed its reply brief on December 10, 2019. On February 27, 2020, the District Court granted the Company’s motion to dismiss the Aurico Action but allowed the plaintiffs to move for leave to amend their complaint within 30 days of the order. The plaintiffs in the Aurico Action filed their motion to amend their complaint on March 30, 2020. The Company’s memorandum of law in opposition to the plaintiff’s motion for leave to amend complaint was filed on April 13, 2020 and the plaintiffs filed their reply memorandum on April 20, 2020. On July 9, 2020, the District Court denied the plaintiffs’ motion to amend their complaint.

 

The Company believes that the allegations made against it and its officers in the Aurico Action are meritless and will vigorously defend them, although no assurance can be given with respect to the ultimate outcome. The Company has not accrued any amounts for this action.

 

(c)Construction claims

 

On April 24, 2017, Bear Creek Contracting Ltd. (“Bear Creek”) filed a Notice of Civil Claim against the Company (the “Bear Creek Action”) alleging that the Company owes Bear Creek C$14,563 in general damages in connection with work undertaken at the Brucejack Mine transmission line. The Bear Creek Action was filed in the Supreme Court of British Columbia.

19

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2020 and 2019
(Expressed in thousands of United States dollars, except for share data)

 

15.CONTINGENCIES (Cont’d)

 

The Company filed a Response to Civil Claim on July 31, 2017, opposing all of the claims and allegations made. Notices of Civil Claim have also been filed by Blue Max Drilling Inc. (April 24, 2017), More Core Diamond Drilling Services Ltd. (March 27, 2017), and Lakelse Air Ltd. (February 23, 2018) who were subcontractors working under Bear Creek. Responses to Civil Claim have been filed in those actions and the claims are understood to be subsumed in the amount claimed by Bear Creek.

 

The Company is of the view that any liability it may have is within the limits of the lien holdback it continues to hold in trust with respect to these claims. The Company believes that all other allegations made against it in the Bear Creek Action, and the other actions, are meritless and will vigorously defend the matter, although no assurance can be given with respect to the ultimate outcome of such proceedings. The Company has not accrued any amounts for any of the actions.

20

EX-99.2 3 ex99-2.htm MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019
 

 

Exhibit 99.2 

 

(PRETIUM LOGO)

 

 

 

 

 

 

 

 

PRETIUM RESOURCES INC.

 

 

 

 

 

 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE THREE AND SIX MONTHS ENDED

JUNE 30, 2020 AND 2019 

1

 

MANAGEMENT’S DISCUSSION AND ANALYSIS

 

This Management’s Discussion and Analysis (“MD&A”) of Pretium Resources Inc. (“Pretivm”, the “Company”, “we”, “our” or “us”) provides information that management believes is relevant to an assessment and understanding of the consolidated financial condition and results of operations of the Company. This MD&A should be read in conjunction with the condensed consolidated interim financial statements for the three and six months ended June 30, 2020 and 2019 as publicly filed in Canada on the System for Electronic Document Analysis and Retrieval (“SEDAR”) website, and in the United States on the EDGAR section of the Securities and Exchange Commission (“SEC”) website.

 

The condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standards (“IAS”) 34, Interim Financial Reporting using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board and interpretations of the International Financial Reporting Standards Interpretations Committee (“IFRIC”). The Company’s significant accounting policies applied in the condensed consolidated interim financial statements are the same as those applied in note 3 of the Company’s annual consolidated financial statements as at and for the years ended December 31, 2019 and 2018.

 

The Company’s functional and presentation currency is the United States dollar. References to “$” or “USD” are to United States dollars, while references to “C$” or “CAD” are to Canadian dollars. All dollar amounts in this MD&A are expressed in thousands of USD, except for share and per ounce data, unless otherwise noted or the context otherwise provides.

 

This MD&A is prepared as of August 5, 2020 and includes certain statements that may be deemed “forward-looking information”, “forward-looking statements”, “future-oriented financial information” and “financial outlook”. We direct readers to the section “Statement Regarding Forward-Looking Information” included within this MD&A.

 

Certain non-IFRS financial performance measures are included in this MD&A. We believe that these measures, in addition to measures prepared in accordance with IFRS, provide readers with an improved ability to evaluate the underlying performance of the Company and compare our results to other companies. These measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These measures do not have any standardized meaning prescribed under IFRS, and therefore may not be comparable to similar measures presented by other issuers. The non-IFRS financial performance measures included in this MD&A are: cost of sales per ounce of gold sold; total cash costs; all-in sustaining costs (“AISC”); average realized gold price and average realized cash margin; adjusted earnings and adjusted basic earnings per share; free cash flow and working capital. Refer to the “Non-IFRS Financial Performance Measures” section for further details and reconciliations of such non-IFRS measures.

 

Additional information relating to us, including our Annual Information Form and Form 40-F, each dated February 21, 2020, are available on the SEDAR website at www.sedar.com and on the EDGAR section of the SEC website at www.sec.gov, respectively.

2

 

SECOND QUARTER 2020 – SUMMARY

 

Operating summary

 

In May 2020, the Brucejack Mine achieved a major milestone with the safe and profitable production of its one millionth ounce of gold since the first gold pour in 2017.

 

There were no cases of the novel coronavirus (“COVID-19”) identified at the Brucejack Mine during the quarter.

 

Gold production totaled 90,419 ounces, on track to achieve 2020 annual guidance, compared to 90,761 ounces in the comparable period in 2019.

 

Mill feed grade averaged 8.9 grams per tonne gold, comparable to 2019.

 

Gold recoveries averaged 96.7% compared to 96.9% in the comparable period in 2019.

 

Process plant throughput averaged 3,596 tonnes per day for a total of 327,262 tonnes of ore compared to 3,562 tonnes per day for a total of 324,171 tonnes of ore in the comparable period in 2019.

 

During the quarter, a total of 3,224 meters of lateral development were achieved.

 

Financial summary

 

The Company generated revenue of $166,567 compared to revenue of $113,202 in the comparable period in 2019.

 

The sale of 96,047 ounces of gold contributed $163,256 of revenue at an average realized price(1) of $1,738 per ounce. In the comparable period in 2019, the sale of 85,953 ounces of gold contributed $107,644 of revenue at an average realized price(1) of $1,319 per ounce.

 

Total cost of sales was $106,555 or $1,109 per ounce of gold sold(1). For the three months ended June 30, 2019, total cost of sales was $83,413 or $970 per ounce of gold sold(1). Total cost of sales increased primarily due to higher production costs for employee salaries and travel costs related to COVID-19 protocols in the amount of $4,727 (C$6,549) as well as higher depreciation and depletion expense resulting from the 2020 Mineral Reserve (defined below) update.

 

Total cash costs(1) were $749 per ounce of gold sold resulting in an average realized cash margin(1) of $951 per ounce of gold sold. In the comparable period in 2019, total cash costs(1) were $702 per ounce of gold sold resulting in an average realized cash margin(1) of $550 per ounce of gold sold.

 

AISC(1) was $911 per ounce of gold sold compared to $940 per ounce of gold sold in the comparable period in 2019.

 

Earnings from mine operations were $60,012 compared to $29,789 in the comparable period in 2019.

 

Net earnings were $32,260 compared to $10,443 in the comparable period in 2019 with the increase primarily resulting from more ounces sold at higher gold prices, a decrease in interest and finance expense offset by an increase in production costs, depreciation and depletion expense and deferred income tax expense.

 

Adjusted earnings(1) were $49,184 compared to $17,013 in the comparable period in 2019.

 

Cash generated by operations was $92,131 compared to $41,183 in the comparable period in 2019. Free cash flow(1) was $82,747 compared to $34,356 in the comparable period in 2019.

 

At June 30, 2020, cash on hand was $124,734 (December 31, 2019 - $23,174) and the Company had positive working capital of $32,299 (December 31, 2019 – deficit of $66,805).

 

 
1Refer to the “Non-IFRS Financial Performance Measures” section for a reconciliation of these amounts.

3

 

YEAR TO DATE 2020 – SUMMARY

 

Operating summary

 

There have been no identified cases of COVID-19 at the Brucejack Mine since the pandemic emerged in the first quarter of 2020.

 

Gold production totaled 173,307 ounces, on track to achieve 2020 annual guidance, compared to 169,941 ounces in the comparable period in 2019.

 

Mill feed grade averaged 8.3 grams per tonne gold compared to 8.8 grams per tonne gold in the comparable period in 2019.

 

Gold recoveries averaged 96.6% compared to 96.9% in the comparable period in 2019.

 

Process plant throughput averaged 3,695 tonnes per day for a total of 672,401 tonnes of ore compared to 3,422 tonnes per day for a total of 619,293 tonnes of ore in the comparable period in 2019.

 

A total of 6,008 meters of lateral development were achieved in the first half of 2020.

 

Financial summary

 

The Company generated revenue of $293,127 compared to revenue of $216,321 in the comparable period in 2019.

 

The sale of 176,508 ounces of gold contributed $288,378 of revenue at an average realized price(1) of $1,677 per ounce. In the comparable period in 2019, the sale of 167,387 ounces of gold contributed $210,002 of revenue at an average realized price(1) of $1,319 per ounce.

 

Total cost of sales was $196,060 or $1,111 per ounce of gold sold(1). For the six months ended June 30, 2019, total cost of sales was $157,380 or $940 per ounce of gold sold(1). Total cost of sales increased primarily due to higher production costs for additional lateral development, definition drilling and employee salaries and travel costs related to COVID-19 as well as higher depreciation and depletion expense resulting from the 2020 Mineral Reserve update.

 

Total cash costs(1) were $766 per ounce of gold sold resulting in an average realized cash margin(1) of $868 per ounce of gold sold. In the comparable period in 2019, total cash costs(1) were $694 per ounce of gold sold resulting in an average realized cash margin(1) of $561 per ounce of gold sold.

 

AISC(1) was $950 per ounce of gold sold compared to $905 per ounce of gold sold in the comparable period in 2019.

 

Earnings from mine operations were $97,067 compared to $58,941 in the comparable period in 2019.

 

Net earnings were $38,497 compared to $14,609 in the comparable period in 2019 with the increase primarily a result of higher gold prices, a decrease in interest and finance expense, a decrease in loss on financial instruments at fair value offset by an increase in production costs, depreciation and depletion expense and deferred income tax expense.

 

Adjusted earnings(1) were $75,047 compared to $33,540 in the comparable period in 2019.

 

Cash generated by operations was $144,669 compared to $81,127 in the comparable period in 2019. Free cash flow(1) was $124,550 compared to $69,375 in the comparable period in 2019.

 

The Company repaid $33,333 of the Loan Facility (defined below) using cash generated from operations.

 

 
1Refer to the “Non-IFRS Financial Performance Measures” section for a reconciliation of these amounts.

4

 

KEY OPERATING AND FINANCIAL STATISTICS

 

The operating and financial data for the periods are as follows:

 

      For the three months ended   For the six months ended 
In thousands of USD,     June 30,   June 30,   June 30,   June 30, 
except where noted     2020   2019   2020   2019 
Operating data                       
Ore mined (wet tonnes)  t   352,594    337,044    710,268    645,431 
Mining rate  tpd   3,875    3,704    3,903    3,566 
Ore milled (dry tonnes)  t   327,262    324,171    672,401    619,293 
Head grade  g/t Au   8.9    8.9    8.3    8.8 
Recovery  %   96.7    96.9    96.6    96.9 
Mill throughput  tpd   3,596    3,562    3,695    3,422 
Gold ounces produced  oz   90,419    90,761    173,307    169,941 
Silver ounces produced  oz   109,332    135,797    233,258    244,031 
Gold ounces sold  oz   96,047    85,953    176,508    167,387 
Silver ounces sold  oz   83,642    104,442    198,282    201,416 
Financial data                       
Revenue  $   166,567    113,202    293,127    216,321 
Earnings from mine operations  $   60,012    29,789    97,067    58,941 
Net earnings for the period  $   32,260    10,443    38,497    14,609 
Per share - basic  $/share   0.18    0.06    0.21    0.08 
Per share - diluted  $/share   0.18    0.06    0.21    0.08 
Adjusted earnings(1)  $   49,184    17,013    75,047    33,540 
Per share - basic(1)  $/share   0.26    0.09    0.40    0.18 
Total cash and cash equivalents  $   124,734    34,281    124,734    34,281 
Cash generated by operating activities  $   92,131    41,183    144,669    81,127 
Free cash flow(1)  $   82,747    34,356    124,550    69,375 
Total assets  $   1,634,204    1,609,644    1,634,204    1,609,644 
Long-term debt(2)  $   382,763    496,507    382,763    496,507 
Production costs (milled)  $/t   196    173    187    176 
Total cash costs(1)  $/oz   749    702    766    694 
All-in sustaining costs(1)  $/oz   911    940    950    905 
Average realized price(1)  $/oz   1,738    1,319    1,677    1,319 
Average realized cash margin(1)  $/oz   951    550    868    561 

 

(1)Refer to the “Non-IFRS Financial Performance Measures” section for a reconciliation of these amounts.

 

(2)As at June 30, 2020, long-term debt does not include the current portion of the Company’s Loan Facility in the amount of $66,667. In the comparable period in 2019, long-term debt does not include the current portion of the Company’s Loan Facility and offtake obligation in the amount of $75,069.

 

The following abbreviations were used above: t (tonnes), tpd (tonnes per day), g/t (grams per tonne), Au (gold) and oz (ounces).

5

 

TABLE OF CONTENTS

 

SECOND QUARTER 2020 – SUMMARY 3
YEAR TO DATE 2020 – SUMMARY 4
KEY OPERATING AND FINANCIAL STATISTICS 5
BUSINESS OVERVIEW 7
COVID-19 PANDEMIC 7
OPERATING RESULTS 8
2020 OUTLOOK 10
2020 UPDATED MINERAL RESOURCE ESTIMATE, MINERAL RESERVE ESTIMATE AND LIFE OF MINE PLAN 11
REGIONAL EXPLORATION 12
ADDITIONAL CLAIMS 12
FINANCIAL RESULTS 13
LIQUIDITY AND CAPITAL RESOURCES 21
SUMMARY OF QUARTERLY FINANCIAL RESULTS 23
COMMITMENTS 24
CONTINGENCIES 24
OFF-BALANCE SHEET ARRANGEMENTS 26
RELATED PARTY TRANSACTIONS 27
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS 27
NEW ACCOUNTING POLICIES 28
NEW ACCOUNTING STANDARDS AND RECENT PRONOUNCEMENTS 29
FINANCIAL INSTRUMENTS 29
EVENTS AFTER REPORTING DATE 31
NON-IFRS FINANCIAL PERFORMANCE MEASURES 32
OUTSTANDING SHARE DATA 37
INTERNAL CONTROL OVER FINANCIAL REPORTING 38
RISKS AND UNCERTAINTIES 38
STATEMENT REGARDING FORWARD-LOOKING INFORMATION 39
CAUTIONARY NOTE TO UNITED STATES INVESTORS 44

6

 

BUSINESS OVERVIEW

 

The Company was incorporated on October 22, 2010 under the laws of the Province of British Columbia and is listed on the Toronto Stock Exchange (TSX.PVG) and New York Stock Exchange (NYSE.PVG). The Company was formed for the acquisition, exploration, development and operation of precious metal resource properties in the Americas.

 

We operate our 100%-owned Brucejack Mine located in northwestern British Columbia. The Brucejack Mine is comprised of four mining leases and six mineral claims totaling 3,306 hectares in area and forms part of our contiguous claims package that comprises over 122,000 hectares. The Brucejack Mine is a high-grade gold underground mine that started commercial production in July 2017. Amended permits were received in December 2018 to increase throughput 40% to an annual maximum of 1.387 million tonnes (an average of 3,800 tonnes per day) from 0.99 million tonnes (2,700 tonnes per day) with the increased mill throughput rate achieved in the fourth quarter of 2019. In May 2020, the Brucejack Mine achieved a major milestone with the safe and profitable production of its one millionth ounce of gold since the first gold pour in 2017. We expect to continue to focus on advancing underground development to expand mine access at depth and to the west. The increased development should provide sufficient access to build the stope inventory required to allow mining operations to optimize gold production.

 

Our exploration and evaluation assets are the Snowfield Project, Bowser Claims and the Porphyry Potential Deep Drilling (“PPDD”) Project. The Snowfield Project mineral claims are in good standing until 2030, and we conduct baseline environmental studies for potential future development of that project. Grassroots exploration is on-going at the Bowser Claims, with several gold prospects identified for further evaluation. The Bowser Claims are in good standing until 2029. The PPDD Project is a deep underground exploration program involving the testing of the extent of Brucejack-style mineralization and the porphyry potential directly below the Brucejack Mine at depth.

 

COVID-19 PANDEMIC

 

The Company’s primary commitment is the safety and health of our workforce and neighbouring communities in northwest British Columbia. There were no cases of COVID-19 identified at the Brucejack Mine as of August 5, 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 (March 23, 2020); and Northern Health COVID-19: Interim Guidelines for Industrial Camps (March 25, 2020). The Company has developed management plans to mitigate the spread of COVID-19 and protect the well-being of our employees, communities and other stakeholders.

 

The Company incurred $4,727 (C$6,549) of additional production costs during the quarter related to employee salaries and travel costs 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. Moreover, 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 the market for our securities. Refer to the “Risks and Uncertainties” section of this MD&A.

7

 

OPERATING RESULTS

 

Gold and silver production and sales

 

During the three months ended June 30, 2020, the Brucejack Mine produced 90,419 ounces of gold and 109,332 ounces of silver. Gold production was similar to 2019, where the Company produced 90,761 ounces of gold and 135,797 ounces of silver. COVID-19 did not directly affect second quarter gold production.

 

During the three months ended June 30, 2020, the Company sold 96,047 ounces of gold and 83,642 ounces of silver compared to 85,953 ounces of gold and 104,442 ounces of silver in the comparable period in 2019. The increase in gold ounces sold was the result of timing of production within the quarter and subsequent sales.

 

During the six months ended June 30, 2020, the Brucejack Mine produced 173,307 ounces of gold and 233,258 ounces of silver. Gold production increased 2% compared to the comparable period in 2019 where the Company produced 169,941 ounces of gold. The increase in production was primarily due to an increase in tonnes milled offset by a decrease in head grade and a lower recovery.

 

During the six months ended June 30, 2020, the Company sold 176,508 ounces of gold and 198,282 ounces of silver compared to 167,387 ounces of gold and 201,416 ounces of silver in the comparable period in 2019. The increase in gold ounces sold was the result of timing of production within the period and subsequent sales.

 

As at June 30, 2020, there were 1,881 ounces of gold doré and 1,726 ounces of gold in concentrate in finished goods inventory recorded at a cost of $1,112 per ounce which includes depreciation and depletion.

 

Processing

 

During the three months ended June 30, 2020, a total of 327,262 tonnes of ore, equivalent to a throughput rate of 3,596 tonnes per day, were processed. This was an increase from the comparable period in 2019, in which a total of 324,171 tonnes of ore, equivalent to a throughput rate of 3,562 tonnes per day, were processed. During the six months ended June 30, 2020, a total of 672,401 tonnes of ore, equivalent to a throughput rate of 3,695 tonnes per day, were processed. This was an increase from the comparable period in 2019, in which a total of 619,293 tonnes of ore, equivalent to a throughput rate of 3,422 tonnes per day, were processed. During the 2020 periods, the mill operated below the permitted level of 3,800 tonnes per day due to scheduled and unscheduled maintenance, focus on lateral development and stope availability. In the comparable periods in 2019, the mill was in the early phases of the planned production ramp-up, following receipt of our 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 8.9 grams per tonne gold for the second quarter of 2020 equivalent to 2019. For the six months ended June 30, 2020, the mill feed grade averaged 8.3 grams per tonne gold compared to 8.8 grams per tonne gold in the comparable period in 2019. For the first half of 2020, the feed grade is within the estimated 2020 guidance range.

8

 

Gold recovery for the second quarter of 2020 was 96.7% compared to 96.9% in the comparable period in 2019. Gold recovery for the first half of 2020 was 96.6% compared to 96.9% in the comparable period in 2019.

 

Mining

 

During the three months ended June 30, 2020, 352,594 wet tonnes of ore were mined, equivalent to a mining rate of 3,875 tonnes per day compared to 337,044 wet tonnes of ore, equivalent to a mining rate of 3,704 tonnes per day in the comparable period in 2019. During the six months ended June 30, 2020, 710,268 wet tonnes of ore were mined, equivalent to a mining rate of 3,903 tonnes per day compared to 645,431 wet tonnes of ore, equivalent to a mining rate of 3,566 tonnes per day in the comparable period in 2019.

 

We continued our lateral development at a targeted rate of approximately 1,000 meters per month. During the three months ended June 30, 2020, a total 3,224 meters of lateral development and 43 meters of vertical development were completed. During the six months ended June 30, 2020, a total of 6,008 meters of lateral development and 103 meters of vertical development were completed.

 

The reverse circulation (“RC”) drilling grade control program was introduced in staggered phases, with the first drill in operation at the beginning of the second quarter on the 1080-meter level. Towards the end of the quarter, as the equipment and personnel became available, a second and third RC drill were commissioned and commenced drilling on the 1140-meter level. A total of 22,164 meters of RC drilling were completed during the quarter.

 

All diamond drilling activity was put on hold at the onset of the COVID-19 pandemic at the end of the first quarter to limit non-essential personnel at Brucejack. By the end of the second quarter, diamond drilling activity had resumed with four diamond drills on site conducting resource and infill drilling. Diamond drilling in the second quarter targeted reserves proximal to mine infrastructure to build stope inventory and provide flexibility for near term mining.

 

Infill diamond drilling in the second half of 2020 is planned 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 of 2021. Drilling is also planned to continue to the north toward the West Zone and will target Inferred Resources and previously intersected mineralization outside of the current Mineral Resource.

 

Lyle Morgenthaler, B.A.Sc., P.Eng., Pretivm’s Chief Mine Engineer is the Qualified Person (“QP”), as defined by National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”), responsible for Brucejack Mine development and has reviewed and approved the scientific and technical information contained in this MD&A relating thereto.

 

Sustaining capital expenditures

 

During the three months ended June 30, 2020, the Company incurred $5,225 on sustaining capital expenditures compared to $7,967 in the comparable period in 2019. Significant sustaining capital expenditures during the period included the construction of the new bulk gravity lab ($1,013), the purchase of a 120-tonne crane ($911) and capitalized development costs ($694).

9

 

In the comparable period in 2019, sustaining capital expenditures were focused on the purchase of underground drills and capitalized development costs.

 

During the six months ended June 30, 2020, the Company incurred $11,192 of sustaining capital expenditures compared to $11,629 in the comparable period in 2019. Significant sustaining capital expenditures during the period included the purchase of underground drills ($2,244), the construction of the new bulk gravity lab ($1,467) and capitalized development costs ($1,092). In the comparable period in 2019, sustaining capital expenditures included the purchase of underground drills, capitalized development costs, access road development and the concentrate bulk loading system.

 

Vertical development costs, including the costs to build new ventilation raises and access ramps that enable the Company to physically access ore underground on multiple mining levels, are capitalized. All costs associated with lateral development to access ore zones in preparation for mining are expensed.

 

2020 OUTLOOK

 

2020 production guidance maintained

 

The Company produced 173,307 ounces of gold during the first half 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 for the remainder of 2020 at an average rate of approximately 3,500 tonnes per day due to planned shutdowns and an increased focus on waste management from accelerated lateral development. 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%.

 

Management believes 2020 production guidance remains achievable assuming there is no new significant impact on operations at the Brucejack Mine, including due to the COVID-19 pandemic. We have taken precautions to mitigate the risk of COVID-19 on our operations as described in the “COVID-19 Pandemic” section above. 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. Refer to the “Risks and Uncertainties” section of this MD&A.

 

2020 financial guidance updated

 

Total cash costs(1) and AISC(1) were $766 and $950 per ounce of gold sold, respectively, for the first half of 2020. Annual financial guidance for 2020 has been updated to include costs for COVID-19 protocols, which are expected to remain in place for the remainder of 2020, of approximately $15,000 and additional drilling of approximately $6,500. Accordingly, we have adjusted our cash costs guidance upwards to a range of $750 to $860 per ounce of gold sold from $725 to $830 per ounce of gold sold and AISC(1) guidance upwards to a range of $960 to $1,120 per ounce gold sold from $910 to $1,060 per ounce of gold sold.

 

 
1Refer to the “Non-IFRS Financial Performance Measures” section for a reconciliation of these amounts.

10

 

AISC(1) estimates continue to include costs associated with lateral development at a rate of approximately 1,000 meters per month through 2020. In addition, the AISC(1) estimates include costs associated with a high-density RC drilling grade control program and definition drilling to increase the volume of grade information necessary to enhance mine planning and optimize gold production.

 

Sustaining capital expenditures for the year are expected to be approximately $40,000, an increase from $30,000, primarily due to additional definition drilling and mill building repairs. Other capital expenditures include approximately $15,000 in expansion capital expenditures and approximately $10,000 for regional exploration.

 

2020 free cash flow(1) forecast updated

 

Free cash flow(1) for the first half of 2020 was $124,550 at an average realized gold price(1) of $1,677 per ounce. With improved gold prices, our free cash flow(1) forecast for 2020 has been modified to a range of $205,000 to $275,000 based on an average gold price of $1,800 per ounce. This compares with our prior forecast of $100,000 to $170,000 based on an average gold price of $1,450 per ounce. If gold prices were to decrease to $1,600 per ounce, the low end of our free cash flow(1) forecast would be $175,000.

 

During the quarter, as a precautionary measure in response to the continuing operational risks related to COVID-19 the Company drew down $16,000 of the revolving portion of the Loan Facility to increase available liquidity. The Company will focus on preserving liquidity while we operate under the COVID-19 safety protocols.

 

2020 UPDATED MINERAL RESOURCE ESTIMATE, MINERAL RESERVE ESTIMATE AND LIFE OF MINE PLAN

 

On March 9, 2020, we announced an updated Mineral Reserve (the “2020 Mineral Reserve”), Mineral Resource (the “2020 Mineral Resource”) and Life of Mine (“LOM”) Plan (the “2020 LOM Plan”, and together with the 2020 Mineral Reserve and 2020 Mineral Resource, the “2020 Updates”) for the Brucejack Mine, which highlight the continued robust economics of the long-life underground operation.

 

The 2020 Updates are detailed in the NI 43-101 Technical Report (the “2020 Report”) entitled “Technical Report on the Brucejack Gold Mine, Northwest British Columbia” dated effective March 9, 2020 prepared by Tetra Tech Canada Inc. and other consultants, all of whom are QPs and independent of the Company. The 2020 Report was filed on April 23, 2020 in Canada under the Company’s profile on SEDAR at www.sedar.com and in the United States on the EDGAR section of the SEC website at www.sec.gov.

 

 
1Refer to the “Non-IFRS Financial Performance Measures” section for a reconciliation of these amounts.

11

 

REGIONAL EXPLORATION

 

The wholly-owned, approximately 1,200-square-kilometer Bowser Property, located east of the Brucejack Mine, is comprised of 337 claims covering an area of 120,811 hectares.

 

2020 Regional Exploration

 

The 2020 regional exploration program on the Company’s Bowser Claims is currently underway with crew and equipment mobilized to site. The exploration program is evaluating several distinct zones that have the potential to host Eskay Creek-style volcanogenic massive sulphide deposits and high-grade, epithermal related gold systems.

 

The primary focus of the 2020 program is the A6 Zone, located approximately 14 kilometers northeast of Brucejack. To follow up on the results of the 2019 program, 10,000 meters of drilling is planned to target Eskay Creek-style volcanogenic massive sulphide mineralization.

 

The 2020 program will also include drilling at the Koopa Zone, located 30 kilometers east-southeast of Brucejack, the Hanging Glacier Zone, located 4.5 kilometers northwest of Brucejack, and the East Snowfield Zone, located 6 kilometers north of Brucejack. In 2019, drilling at Koopa intersected wide intervals of low-grade, structurally-controlled epithermal-style gold mineralization. In 2020, 1,500 meters of drilling is planned to target deeper, potentially higher-grade parts of the system. At Hanging Glacier, 1,200 meters of drilling is planned to test an area where assay results from soil and prospecting samples returned anomalous gold values. At East Snowfield, 1,000 meters of drilling is planned to test a high-grade gold structure intersected during previous drilling campaigns.

 

The grassroots exploration program will continue through the summer and also include soil sampling, prospecting, regional mapping and hyperspectral imaging.

 

Kenneth C. McNaughton, M.A.Sc., P.Eng., Pretivm’s Vice President and Chief Exploration Officer is the QP responsible for the regional grassroots exploration program and has reviewed and approved the scientific and technical information in this MD&A related thereto.

 

ADDITIONAL CLAIMS

 

Our claims also include the Snowfield Project which borders Brucejack to the north and is comprised of one mineral claim with an area of 1,217 hectares. Since we acquired the Snowfield Project in 2010, we have continued to carry out environmental studies in conjunction with Brucejack. Snowfield represents an opportunity for our shareholders.

12

 

FINANCIAL RESULTS

 

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

 

   For the three months ended   For the six months ended 
   June 30,   June 30,   June 30,   June 30, 
   2020   2019   2020   2019 
Revenue  $166,567   $113,202   $293,127   $216,321 
Cost of sales   106,555    83,413    196,060    157,380 
Earnings from mine operations   60,012    29,789    97,067    58,941 
Corporate administrative costs   4,822    4,305    10,398    8,272 
Operating earnings   55,190    25,484    86,669    50,669 
Interest and finance expense   (4,685)   (8,782)   (12,407)   (18,182)
Loss on financial instruments at fair value   -    (3,467)   -    (10,993)
Interest and finance income   269    236    359    523 
Foreign exchange gain (loss)   (596)   (379)   502    (695)
Earnings before taxes   50,178    13,092    75,123    21,322 
Current income tax expense   (1,592)   (1,051)   (2,919)   (1,977)
Deferred income tax expense   (16,326)   (1,598)   (33,707)   (4,736)
Net earnings and comprehensive earnings for the period  $32,260   $10,443   $38,497   $14,609 

 

Three months ended June 30, 2020 compared to the three months ended June 30, 2019

 

Net and comprehensive earnings for the three months ended June 30, 2020 were $32,260 compared to $10,443 for the comparable period in 2019. The increase in net earnings was mainly attributed to an increase in earnings generated from operations due to more ounces sold at higher gold prices, a decrease in interest and finance expense, a decrease in the loss on financial instruments at fair value offset by an increase in production costs due to COVID-19, depreciation and depletion due to the 2020 Mineral Reserve update and an increase in deferred income tax expense.

 

Earnings from mine operations were $60,012 for the three months ended June 30, 2020 compared to $29,789 for the comparable period in 2019.

 

Revenue

 

For the three months ended June 30, 2020, the Company generated revenue of $166,567, which included $164,688 of revenue from contracts with customers plus a gain on trade receivables at fair value related to provisional pricing adjustments of $1,879. During the comparable period in 2019, the Company generated revenue of $113,202 which included $109,134 of revenue from contracts with customers and a gain on trade receivables at fair value related to provisional pricing adjustments of $4,068. The increase in revenue was primarily the result of higher gold prices and higher gold ounces sold in the period due to the timing of production and subsequent sales.

13

 

For the three months ended June 30, 2020, the Company sold 96,047 ounces of gold, at an average realized price(1) of $1,738 per ounce generating $163,256 in revenue from contracts with customers. In the comparable period in 2019, the Company sold 85,953 ounces of gold, at an average realized price(1) of $1,319 per ounce generating $107,644 in revenue from contracts with customers. The average London Bullion Market Association (“LBMA”) AM and PM market price over the three months ended June 30, 2020 was $1,711 (2019 – $1,309) per ounce of gold.

 

The Company sold 83,642 ounces of silver generating $1,432 in revenue compared to 104,442 ounces of silver generating $1,490 in revenue in the comparable period in 2019.

 

Cost of sales

 

Total cost of sales for the three months ended June 30, 2020 were $106,555 or $1,109 per ounce of gold sold(1) compared to $83,413 or $970 per ounce of gold sold(1) in the comparable period in 2019. Cost of sales includes production costs, depreciation and depletion, site share-based compensation, royalties and selling costs, and changes in inventories, reflecting the difference between produced and sold ounces.

 

Production costs

 

For the three months ended June 30, 2020, production costs, after adjustments for changes in inventories, were $68,108 compared to $57,157 in the comparable period in 2019. Production costs include mining, processing, surface services and other and mine general and administrative costs. Production costs, before adjustments for changes in inventories, were as follows:

     
   For the three months ended 
In thousands of USD,      June 30,       June 30, 
except for tonnes and per tonne data      2020       2019 
Ore mined (wet tonnes)   352,594         337,044      
Ore milled (dry tonnes)   327,262         324,171      
Mining(1)  $32,882   $/t93   $31,452   $/t93 
Processing(2)   7,099    22    5,647    17 
Surface services and other(2)   10,016    31    8,164    25 
Mine general and administrative(2)   14,192    43    10,698    33 
Total production costs(2)  $64,189   $/t196   $55,961   $/t173 

 

(1)Cost per tonne data is based on mined tonnes – wet.

 

(2)Cost per tonne data is based on milled tonnes – dry.

 

During the quarter, production costs increased due to the impact of COVID-19 safety protocols, mainly for employee salaries and travel costs in the amount of $4,727 (C$6,549). Mine general and administrative costs also included $1,642 (C$2,224) associated with the resignation of the Company’s Vice President, Operations (“VP Ops”), payable in accordance with his employment agreement.

 

 
1Refer to the “Non-IFRS Financial Performance Measures” section for a reconciliation of these amounts.

14

 

During the quarter, costs were incurred for lateral development at the Brucejack Mine at an average rate of approximately 1,075 meters (2019 – 940 meters) per month.

 

A majority of production costs were incurred in Canadian dollars. During the three months ended June 30, 2020, the average foreign exchange rate was C$1.3853 to $1.00 (2019 – C$1.3377 to $1.00).

 

Depreciation and depletion

 

Depreciation and depletion, after adjustments for changes in inventories, for the three months ended June 30, 2020 was $32,636 compared to $20,650 in the comparable period in 2019. The increase in depreciation and depletion was due to the decrease in the Mineral Reserve in the 2020 Updates and an increase in mined ounces.

 

Most of the Company’s depreciation and depletion is determined using the units of production method based on total ounces mined over the estimated Proven and Probable Mineral Reserves.

 

Site share-based compensation

 

Site share-based compensation, after adjustments for changes in inventories, for the three months ended June 30, 2020 was an expense of $516 compared to $920 in the comparable period in 2019. The decrease in site share-based compensation was due to a lower Company share price for valuation of its cash-settled restricted share units (“RSUs”) and performance share units (“PSUs”) offset by timing of sales (movement of costs in inventory) and vesting of share-based compensation awards issued.

 

Royalties and selling costs

 

Royalties and selling costs, after adjustments for changes in inventories, for the three months ended June 30, 2020 were $2,168 (2019 – $1,430) and $3,127 (2019 – $3,246), respectively. The increase in royalty expense was due to higher revenues from mine operations impacting the amount recognized under the 1.2% NSR Royalty (defined below). Refer to the “Commitments” section of this MD&A.

 

Selling costs includes transportation costs which were $2,879 (2019 – $3,178). The decrease in transportation costs was primarily due to decreased concentrate volumes shipped through Stewart, British Columbia.

 

Total cash costs(1) and AISC(1)

 

Total cash costs(1) for the three months ended June 30, 2020 were $749 per ounce of gold sold compared to $702 per ounce of gold sold in the comparable period in 2019. Total cash costs(1) increased due to higher production costs related to employee salaries and travel costs associated with COVID-19 safety protocols.

 

 
1Refer to the “Non-IFRS Financial Performance Measures” section for a reconciliation of these amounts.

15

 

AISC(1) for the three months ended June 30, 2020 totaled $911 per ounce of gold sold compared to $940 per ounce of gold sold in the comparable period in 2019. AISC(1) decreased primarily due to higher gold ounces sold offset by increased total cash costs. Sustaining capital expenditures amounted to $5,225 (including $694 deferred development costs incurred during production) compared to $7,967 in the comparable period in 2019.

 

Corporate administrative costs

 

Corporate administrative costs for the three months ended June 30, 2020 were $4,822 compared to $4,305 in the comparable period in 2019.

 

Professional fees for the three months ended June 30, 2020 were $754 compared to $227 in the comparable period in 2019. The increase in professional fees was due to consulting fees incurred for an executive search and increased legal costs for the preparation and filing of the Company’s base shelf prospectus.

 

Interest and finance expense

 

During the three months ended June 30, 2020, the Company incurred interest and finance expense of $4,685 compared to $8,782 in the comparable period in 2019. The Company incurred $2,429 (2019 – $6,502) of interest expense related to its $480,000 senior secured loan facility (the “Loan Facility”). The decrease in interest expense was the result of a decrease in the overall effective interest rate on the Loan Facility from 5.8% to 3.6% driven by a decrease in London Inter-Bank Offered Rate (“LIBOR”) from 2.4% to 0.2%.

 

Current and deferred income taxes

 

For the three months ended June 30, 2020, current income tax expense was $1,592 related to the 2% net current proceeds portion of the British Columbia Mineral Tax (“BCMT”) compared to $1,051 in the comparable period in 2019. These amounts represent our cash taxes payable.

 

Currently, the Company does not have federal and other provincial income taxes payable due to Brucejack Mine development and capital expenditure tax pools and pre-operating tax losses. The Company does not anticipate paying cash taxes for federal and provincial income taxes for three to four years, based on the 2020 LOM Plan update and current gold prices. Once the Company is in a tax payable position, we anticipate paying taxes at a combined rate of 36.5% on mine operating earnings.

 

The Company is subject to Canadian federal and British Columbia provincial income taxes with an aggregate rate of 27%. The Company is also subject to the BCMT, which is accounted for as an income tax. The BCMT requires initial payments of 2% of net current proceeds until initial construction tax pools are utilized, after which a rate of 13% applies. The BCMT is calculated in CAD which results in foreign exchange movements on our BCMT tax pools each period. Additionally, we have certain assets recorded with application of IAS 12, Income Taxes, initial recognition exemption, which results in no corresponding deferred income tax recovery as the assets are amortized. These items will continue to cause fluctuations on our overall effective tax rate in future periods.

 

 
1Refer to the “Non-IFRS Financial Performance Measures” section for a reconciliation of these amounts.

16

 

For the three months ended June 30, 2020, deferred income tax expense was $16,326 compared to a deferred income tax expense of $1,598 in the comparable period in 2019.

 

For the three months ended June 30, 2020, our effective tax rate, including both current and deferred income taxes, was 35.7% (2019 – 20.2%). This includes a $3,792 (2019 - $3,588) deferred income tax recovery related to foreign exchange movements on our BCMT tax pools as foreign exchange rates moved from C$1.4187: $1.00 to C$1.3628: $1.00 during the period. Excluding the effect of foreign exchange on our BCMT pools, our effective tax rate was 43.3% (2019 – 37.4%).

 

Six months ended June 30, 2020 compared to the six months ended June 30, 2019

 

Net and comprehensive earnings for the six months ended June 30, 2020 were $38,497 compared to $14,609 for the comparable period in 2019. The increase in net earnings was mainly attributed to an increase in earnings generated from operations due to more ounces sold at higher gold prices, a decrease in the loss on financial instruments at fair value, a decrease in interest and finance expense offset by an increase in production costs, depreciation and depletion due to the 2020 Mineral Reserve update and an increase in deferred income tax expense.

 

Earnings from mine operations were $97,067 for the six months ended June 30, 2020 compared to $58,941 for the comparable period in 2019.

 

Revenue

 

For the six months ended June 30, 2020, the Company generated revenue of $293,127, which included $291,622 of revenue from contracts with customers plus a gain on trade receivables at fair value related to provisional pricing adjustments of $1,505. During the comparable period in 2019, the Company generated revenue of $216,321 which included $212,960 of revenue from contracts with customers and a gain on trade receivables at fair value related to provisional pricing adjustments of $3,361. The increase in revenue was primarily the result of higher gold prices and higher gold ounces sold in the period due to the timing of production and subsequent sales.

 

For the six months ended June 30, 2020, the Company sold 176,508 ounces of gold, at an average realized price(1) of $1,677 per ounce, generating $288,378 in revenue from contracts with customers. In the comparable period in 2019, the Company sold 167,387 ounces of gold, at an average realized price(1) of $1,319 per ounce, generating $210,002 in revenue from contracts with customers. The average LBMA AM and PM market price over the six months ended June 30, 2020 was $1,646 (2019 – $1,307) per ounce of gold.

 

The Company sold 198,282 ounces of silver generating $3,244 in revenue compared to 201,416 ounces of silver generating $2,958 in revenue in the comparable period in 2019.

 

 
1Refer to the “Non-IFRS Financial Performance Measures” section for a reconciliation of these amounts.

17

 

Cost of sales

 

Total cost of sales for the six months ended June 30, 2020 were $196,060 or $1,111 per ounce of gold sold(1) compared to $157,380 or $940 per ounce of gold sold(1) in the comparable period in 2019. Cost of sales includes production costs, depreciation and depletion, site share-based compensation, royalties and selling costs, and changes in inventories, reflecting the difference between produced and sold ounces.

 

Production costs

 

For the six months ended June 30, 2020, production costs, after adjustments for changes in inventories, were $128,252 compared to $110,159 in the comparable period in 2019. Production costs include mining, processing, surface services and other and mine general and administrative costs. Production costs, before adjustments for changes in inventories, were as follows:

     
   For the six months ended 
In thousands of USD,      June 30,       June 30, 
except for tonnes and per tonne data      2020       2019 
Ore mined (wet tonnes)   710,268         645,431      
Ore milled (dry tonnes)   672,401         619,293      
Mining(1)  $64,271   $/t90   $58,902   $/t91 
Processing(2)   14,419    21    11,639    19 
Surface services and other(2)   21,153    31    17,107    28 
Mine general and administrative(2)   26,034    39    21,322    34 
Total production costs(2)  $125,877   $/t187   $108,970   $/t176 

 

(1)Cost per tonne data is based on mined tonnes – wet.

 

(2)Cost per tonne data is based on milled tonnes – dry.

 

For the six months ended June 30, 2020, salaries and benefits, included in production costs, increased due to annual salary adjustments, employee salaries and travel costs due to the COVID-19 safety protocols in the amount of $4,727 (C$6,549) and costs associated with the resignation of the Company’s VP Ops.

 

Production costs increased in respect of contractors, supplies and consumables due to additional lateral development and definition drilling and increased contractor premiums due to COVID-19. During the six months ended June 30, 2020, costs were incurred for lateral development at the Brucejack Mine at an average rate of approximately 1,001 meters (2019 – 880 meters) per month.

 

A majority of production costs were incurred in Canadian dollars. During the six months ended June 30, 2020, the average foreign exchange rate was C$1.3651 to $1.00 (2019 – C$1.3336 to $1.00).

 

 
1Refer to the “Non-IFRS Financial Performance Measures” section for a reconciliation of these amounts.

18

 

Depreciation and depletion

 

Depreciation and depletion, after adjustments for changes in inventories, for the six months ended June 30, 2020 was $57,214 compared to $36,741 in the comparable period in 2019. The increase in depreciation and depletion was due to the decrease in the Mineral Reserve in the 2020 Updates.

 

Most of the Company’s depreciation and depletion is determined using the units of production method based on total ounces mined over the estimated Proven and Probable Mineral Reserves.

 

Site share-based compensation

 

Site share-based compensation, after adjustments for changes in inventories, for the six months ended June 30, 2020 was an expense of $345 compared to $1,503 in the comparable period in 2019. The decrease in site share-based compensation was due to a lower Company share price for valuation of its cash-settled RSUs and PSUs offset by timing of sales (movement of costs in inventory) and vesting of share-based compensation awards issued.

 

Royalties and selling costs

 

Royalties and selling costs, after adjustments for changes in inventories, for the six months ended June 30, 2020 were $3,741 (2019 – $2,711) and $6,508 (2019 – $6,255), respectively. The increase in royalty expense was due to higher revenues from mine operations impacting the amount recognized under the 1.2% NSR Royalty. Refer to the “Commitments” section of this MD&A.

 

Selling costs includes transportation costs which were $5,878 (2019 – $6,133). The decrease in transportation costs was primarily due to decreased concentrate volumes shipped through Stewart, British Columbia.

 

Total cash costs(1) and AISC(1)

 

Total cash costs(1) for the six months ended June 30, 2020 were $766 per ounce of gold sold compared to $694 per ounce of gold sold in the comparable period in 2019. Total cash costs(1) increased due to higher production costs for additional lateral development and definition drilling as well as employee salaries and travel costs due to COVID-19 safety protocols.

 

AISC(1) for the six months ended June 30, 2020 totaled $950 per ounce of gold sold compared to $905 per ounce of gold sold in the comparable period in 2019. AISC(1) increased primarily due to increased total cash costs. Sustaining capital expenditures amounted to $11,192 (including $1,092 deferred development costs incurred during production) compared to $11,629 in the comparable period in 2019.

 

 
1Refer to the “Non-IFRS Financial Performance Measures” section for a reconciliation of these amounts.

19

 

Corporate administrative costs

 

Corporate administrative costs for the six months ended June 30, 2020 were $10,398 compared to $8,272 in the comparable period in 2019.

 

Salaries and benefits for the six months ended June 30, 2020 were $5,671 compared to $2,454 in the comparable period in 2019. The increase in salaries and benefits was due to termination costs in the amount of $2,234 for the departure the former President and Chief Executive Officer and adjustments for the final 2019 employee bonus.

 

Share-based compensation for the six months ended June 30, 2020 was $440 compared to $2,326 in the comparable period in 2019. The decrease in share-based compensation was due to a lower Company share price for valuation of its cash-settled RSUs, PSUs and deferred share units (“DSUs”).

 

Interest and finance expense

 

During the six months ended June 30, 2020, the Company incurred interest and finance expense of $12,407 compared to $18,182 in the comparable period in 2019. The Company incurred $7,827 (2019 – $13,780) of interest expense related to its Loan Facility. The decrease in interest expense was the result of a decrease in the overall effective interest rate on the Loan Facility from 5.8% to 3.6% driven by a decrease in LIBOR from 2.4% to 0.2%.

 

Current and deferred income taxes

 

For the six months ended June 30, 2020, current income tax expense was $2,919 related to the 2% net current proceeds portion of the BCMT compared to $1,977 in the comparable period in 2019. These amounts represent our cash taxes payable.

 

For the six months ended June 30, 2020, deferred income tax expense was $33,707 compared to a deferred income tax expense of $4,736 in the comparable period in 2019.

 

For the six months ended June 30, 2020, our effective tax rate, including both current and deferred income taxes, was 48.8% including a $3,792 deferred income tax expense related to foreign exchange movements on our BCMT tax pools as foreign exchange rates moved from C$1.2988: $1.00 to C$1.3628: $1.00 during the period. Excluding the effect of foreign exchange on our BCMT pools, our effective tax rate was 43.8% (2019 – 39.3%).

20

 

LIQUIDITY AND CAPITAL RESOURCES

 

The Company manages liquidity risk by monitoring actual and projected cash flows and matching the maturity profile of financial assets and liabilities. Cash flow forecasting is performed regularly. The Company monitors forecasts of liquidity in the form of cash and cash equivalents to ensure it has sufficient cash to meet operational needs.

 

Factors that can impact the Company’s liquidity are monitored regularly and include gold market prices, foreign exchange rates, production levels, operating costs and capital costs. In addition, any suspension of production as a result of the COVID-19 pandemic or otherwise will impact the Company’s liquidity. Contractual obligations and other commitments that could impact the Company’s liquidity are detailed in the “Commitments” section of this MD&A. We prepare annual expenditure budgets that are approved by our Board of Directors.

 

Our capital structure consists of debt instruments, convertible debt instruments and equity attributable to common shareholders comprised of issued share capital, other reserves and deficit.

 

Liquidity and capital resources

 

Working capital(1)

 

Our cash and cash equivalents as at June 30, 2020 totaled $124,734, increasing by $101,560 from $23,174 as at December 31, 2019. The increase in cash and cash equivalents was primarily due to an increase in cash flows generated from operations of the Brucejack Mine, a draw-down of the revolving portion of the Loan Facility, a decrease in principal debt repayments and interest on the Loan Facility offset by an increase in sustaining and expansion capital expenditures.

 

The Company has positive working capital(1) of $32,299 as at June 30, 2020 compared to a deficit of $66,805 as at December 31, 2019. At current gold prices and our average realized cash margin(1), management believes future cash flows from operations are sufficient to fund our operations, as well as other planned and foreseeable commitments currently estimated for 2020. With respect to medium- and longer-term capital requirements, management believes that operating cash flow, the Company’s active management of its operations and development activities, and where appropriate, capital available through financing sources such as debt and equity funding, will enable the Company to meet its capital requirements. 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 the market for our securities. Management continues to monitor the risk associated with the COVID-19 pandemic on our liquidity position. Refer to the “Risks and Uncertainties” section of this MD&A.

 

At June 30, 2020, $459 was available under our Loan Facility for additional liquidity. During the quarter, as a precautionary measure to increase available liquidity, the Company drew down $16,000 of the revolving portion of the Loan Facility. Further, the Company filed a base shelf prospectus in Canada and a registration statement on Form F-10 in the United States, which allows it to offer up to $600,000 of common shares, debt securities, warrants, units, subscription receipts and share purchase contracts from time to time until July 2022.

 

 
1Refer to the “Non-IFRS Financial Performance Measures” section for a reconciliation of these amounts.

21

 

Working capital(1) items other than cash and cash equivalents and the current portion of long-term debt consisted of receivables and other of $13,257 and inventories of $19,464 (valued at cost) offset by accounts payable and accrued liabilities of $58,489.

 

Receivables and other is comprised primarily of $10,252 of trade receivables, $1,807 of prepayments and $797 of Goods and Services Tax refunds. Inventory is comprised of $14,332 of materials and supplies, $4,012 of finished metal and $1,120 of in-circuit inventory.

 

Accounts payable and accrued liabilities includes trade payables and accrued liabilities of $47,878, the current portion of lease obligations of $5,383, the DSU liability of $2,016, and the current portion of the RSU liability of $1,321. Trade payables and accrued liabilities includes $6,036 of remaining disputed construction related payables and holdbacks.

 

During the six months ended June 30, 2020, the exercise of share options provided us with $7,061 (2019 – $2,278) of additional liquidity.

 

Cash flows

 

The Company’s cash flows from operating, investing and financing activities are summarized in the following table for the three and six months ended June 30, 2020 and 2019:

         
   For the three months ended   For the six months ended 
   June 30,   June 30,   June 30,   June 30, 
In thousands of USD  2020   2019   2020   2019 
Cash flow information                    
Cash generated by operations  $92,131   $41,183   $144,669   $81,127 
Cash (used in) generated by financing activities   673    (51,270)   (22,268)   (81,129)
Cash used in investing activities   (9,384)   (6,827)   (20,119)   (11,752)
Effect of foreign exchange rate changes on cash and cash equivalents   748    327    (722)   628 
Change in cash and cash equivalents  $84,168   $(16,587)  $101,560   $(11,126)

 

The Company generated $92,131 and $144,669 in operating cash flows for the three and six months ended June 30, 2020, respectively, compared to $41,183 and $81,127 for the respective comparable periods in 2019. The increase in cash flows generated from operations is primarily due to more gold ounces sold at a higher gold price per ounce.

 

The Company generated $673 in financing cash flows for the three months ended June 30, 2020 compared to $51,270 used in the comparable period in 2019. For the second quarter of 2020, financing cash inflows included a $16,000 (2019 – nil) draw down on the Loan Facility and $6,052 (2019 – $2,018) of proceeds from the exercise of share options offset by a $16,666 (2019 – $44,667) repayment on the Loan Facility, payment of $3,244 (2019 – $6,893) in interest related to the Loan Facility and lease payments of $1,469 (2019 – $1,628).

 

 
1Refer to the “Non-IFRS Financial Performance Measures” section for a reconciliation of these amounts.

22

 

The Company used $22,268 in financing cash flows for the six months ended June 30, 2020 (2019 - $81,129). For the first half of 2020, financing cash outflows included $33,333 (2019 - $64,667) of repayments on the Loan Facility, payment of $8,913 (2019 – $15,289) in interest related to the Loan Facility and convertible notes and lease payments of $3,083 (2019 – $3,184) offset by a $16,000 (2019 – nil) draw down on the Loan Facility and $7,061 (2019 – $2,278) of proceeds from the exercise of share options.

 

Cash used in investing activities for the three and six months ended June 30, 2020 was $9,384 and $20,119, respectively, compared to $6,827 and $11,752 in the respective comparable periods in 2019. For both 2020 and 2019 periods, cash used in investing activities was related to sustaining and expansion capital expenditures and exploration and evaluation expenditures. The outflows were higher in 2020 due to more activity on significant expansion projects.

 

SUMMARY OF QUARTERLY FINANCIAL RESULTS

 

The following table contains selected quarterly information derived from the Company’s unaudited quarterly condensed consolidated interim financial statements, which are reported under IFRS applicable to interim financial reporting.

                                 
In thousands of USD,  2020   2020   2019   2019   2019   2019   2018   2018 
except per share data  Q2   Q1   Q4   Q3   Q2   Q1   Q4   Q3 
Revenue  $166,567   $126,560   $135,484   $132,735   $113,202   $103,119   $108,596   $110,060 
Earnings from mine operations  $60,012   $37,055   $45,857   $46,585   $29,789   $29,152   $36,117   $37,608 
Net earnings  $32,260   $6,237   $20,049   $6,259   $10,443   $4,166   $2,847   $10,734 
Comprehensive earnings  $32,260   $6,237   $20,049   $6,259   $10,443   $4,166   $3,535   $11,725 
Earnings per share -                                        
Basic  $0.18   $0.03   $0.11   $0.03   $0.06   $0.02   $0.01   $0.06 
Diluted  $0.18   $0.03   $0.11   $0.03   $0.06   $0.02   $0.01   $0.06 
Total assets  $1,634,204   $1,575,330   $1,573,167   $1,579,105   $1,609,644   $1,625,855   $1,613,418   $1,771,543 
Long-term liabilities(1)  $508,066   $491,885   $489,510   $489,464   $550,196   $579,873   $573,659   $178,088 
Cash dividends  $-   $-   $-   $-   $-   $-   $-   $- 
Cash and cash equivalents  $124,734   $40,566   $23,174   $16,583   $34,281   $50,868   $45,407   $190,318 
Mineral properties, plant and equipment  $1,466,648   $1,486,112   $1,500,512   $1,519,702   $1,521,301   $1,530,763   $1,522,919   $1,534,908 

 

(1)As at June 30, 2020, long-term liabilities do not include the current portion of the Company’s Loan Facility in the amount of $66,667. Long-term liabilities in comparable quarters do not include the current portion of the Company’s Loan Facility, offtake obligation, stream obligation and senior secured credit facility.

 

Our financial results are primarily driven by gold production and the average realized price(1) of gold. Significant changes in either of these factors directly impact our revenue, earnings from mine operations and net and comprehensive earnings.

 

 
1Refer to the “Non-IFRS Financial Performance Measures” section for a reconciliation of these amounts.

23

 

COMMITMENTS

 

The following table provides our contractual obligations as of June 30, 2020:

                     
In thousands of USD  1 year   2-3 years   4-5 years   More than
5 years
   Total 
Operating activities:                         
Decommissioning and restoration provision  $53   $120   $-   $23,412   $23,585 
Lease obligations   5,816    4,439    1,021    -    11,276 
Purchase commitments   5,126    -    -    -    5,126 
Short-term lease commitments   239    -    -    -    239 
Financing activities:                         
Principal repayments on Loan Facility   66,667    298,000    -    -    364,667 
Repayment of convertible notes   2,250    102,250    -    -    104,500 
Interest payments on Loan Facility(1)   9,522    10,103    -    -    19,625 
   $89,673   $414,912   $1,021   $23,412   $529,018 

 

(1)Interest payments on Loan Facility represent management’s reasonable estimate based on current LIBOR and the Company’s projected applicable margin in accordance with the terms of the Loan Facility.

 

Commitments – Brucejack Mine

 

The Company and the Nisga’a Nation have entered into a comprehensive Cooperation and Benefits Agreement in respect of the Brucejack Mine. Under the terms of the Agreement, the Nisga’a Nation will provide ongoing support for the development and operation of Brucejack with participation in its economic benefits.

 

The Brucejack Mine is subject to a 1.2% net smelter returns royalty (“1.2% NSR Royalty”) on production in excess of cumulative 503,386 ounces of gold and 17,907,080 ounces of silver. The gold ounce production threshold for the 1.2% NSR Royalty was met in December 2018. For the six months ended June 30, 2020, $3,383 (2019 – $2,447) was expensed to royalties and selling costs in the statement of earnings.

 

CONTINGENCIES

 

The Company is involved in various claims, litigation and other matters in the ordinary course and conduct of business. Some of these pending matters will take a number of years to resolve. While it is not possible to determine the ultimate outcome of such actions at this time, and inherent uncertainties exist in predicting such outcomes, it is the Company’s belief that the ultimate resolution of such actions is not reasonably likely to have a material adverse effect on its consolidated financial position or results of operations.

24

 

Class action lawsuits

 

Canadian class action

 

On October 29, 2013, David Wong, a shareholder of the Company, filed a proposed class action claim (the “Wong Action”) against the Company, Robert Quartermain (a director, and the President and the CEO of the Company at such time) and Snowden Mining Industry Consultants Ltd. (“Snowden”). The Wong Action was filed in the Ontario Superior Court of Justice.

 

The Wong Action alleges that the price of the Company’s shares on the TSX and NYSE suffered a significant drop in value following the announcement on October 9, 2013 of the resignation of Strathcona Mineral Services Ltd. (“Strathcona”), the consultant responsible for overseeing and reporting on the 10,000-tonne bulk sample, and the announcement of Strathcona’s reasons for resigning on October 22, 2013.

 

The Wong Action claims C$60,000 in general damages on behalf of a class of persons who acquired the Company’s securities between July 23, 2013 and October 21, 2013. Snowden is no longer a defendant in the Wong Action.

 

The plaintiff in the Wong Action brought a motion for leave to commence an action under the secondary market provisions in Part XXIII.1 of the Ontario Securities Act. The motion was heard on May 29 and 30, 2017. The Court allowed the plaintiff’s motion on July 20, 2017. The Company was denied leave to appeal this decision. The Company and Robert Quartermain consented to, and on January 23, 2019 the Court granted, an order certifying the Wong Action as a class proceeding pursuant to the Class Proceedings Act (Ontario). The Company and Robert Quartermain have moved for summary judgment to dismiss the Wong Action and the motion for summary judgment is scheduled to be heard in the fourth quarter of 2020. Recently, the plaintiff brought a motion to amend the statement of claim to plead additional misrepresentations. On July 22, 2020, the Court refused to permit these new allegations. The plaintiff has indicated that they will appeal this decision.

 

The Company believes that the allegations made against it in the Wong Action are meritless and will vigorously defend them, although no assurance can be given with respect to the ultimate outcome. The Company has not accrued any amounts for this action.

 

United States Class Action

 

Two putative class action complaints were filed against the Company and certain of its officers in the United States District Court for the Southern District of New York, one on September 7, 2018 and the other on October 19, 2018. The complaints were filed on behalf of an alleged class of all persons and entities who purchased or acquired shares of the Company between July 21, 2016 and September 6, 2018, and relate to public disclosures of the Company made between July 2016 and September 2018 regarding the Brucejack Mine.

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On April 8, 2019, the United States District Court for the Southern District of New York issued an order granting Aurico Gold Fund LP’s motion to consolidate the two cases under the case caption “In re Pretium Resources, Inc. Securities Litigation” (the “Aurico Action”), appoint itself as lead plaintiff, and approve lead plaintiff’s selection of counsel. On June 21, 2019, the plaintiffs in the Aurico Action filed a Consolidated Amended Class Action Complaint. The Company has retained legal counsel in connection with these matters and on August 27, 2019, filed its memorandum of law in support of its motion to dismiss the Aurico Action. The plaintiffs filed their opposition to the Company’s motion to dismiss on October 28, 2019 and the Company filed its reply brief on December 10, 2019. On February 27, 2020, the District Court granted the Company’s motion to dismiss the Aurico Action but allowed the plaintiffs to move for leave to amend their complaint within 30 days of the order. The plaintiffs in the Aurico Action filed their motion to amend their complaint on March 30, 2020. The Company’s memorandum of law in opposition to plaintiff’s motion for leave to amend complaint was filed on April 13, 2020 and the plaintiffs filed their reply memorandum on April 20, 2020. On July 9, 2020, the District Court denied the plaintiffs’ motion to amend their complaint.

 

The Company believes that the allegations made against it and its officers in the Aurico Action are meritless and will vigorously defend them, although no assurance can be given with respect to the ultimate outcome. The Company has not accrued any amounts for this action.

 

Construction claims

 

On April 24, 2017, Bear Creek Contracting Ltd. (“Bear Creek”) filed a Notice of Civil Claim against the Company (the “Bear Creek Action”) alleging that the Company owes Bear Creek C$14,563 in general damages in connection with work undertaken at the Brucejack Mine transmission line. The Bear Creek Action was filed in the Supreme Court of British Columbia.

 

The Company filed a Response to Civil Claim on July 31, 2017, opposing all of the claims and allegations made. Notices of Civil Claim have also been filed by Blue Max Drilling Inc. (April 24, 2017), More Core Diamond Drilling Services Ltd. (March 27, 2017), and Lakelse Air Ltd. (February 23, 2018) who were subcontractors working under Bear Creek. Responses to Civil Claim have been filed in those actions and the claims are understood to be subsumed in the amount claimed by Bear Creek.

 

The Company is of the view that any liability it may have is within the limits of the lien holdback it continues to hold in trust with respect to these claims. The Company believes that all other allegations made against it in the Bear Creek Action, and the other actions, are meritless and will vigorously defend the matter, although no assurance can be given with respect to the ultimate outcome of such proceedings. The Company has not accrued any amounts for any of the actions.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

The Company does not have any off-balance sheet arrangements.

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RELATED PARTY TRANSACTIONS

 

Other than as expressed herein, and remuneration of key management personnel and the Board of Directors, in the ordinary course of their employment or directorship, as applicable, we had no transactions with related parties as defined in IAS 24, Related Party Disclosures.

 

We have entered into employment agreements with each of our officers, including our President and Chief Executive Officer (“CEO”), our Executive Vice President and Chief Financial Officer (our “CFO”), our VP Ops, our Executive Vice President, Corporate Affairs and Sustainability (our “EVP Corporate”), and our Vice President and Chief Exploration Officer (our “CExO). Subsequent to quarter end, we entered into an employment agreement with our Vice President and Chief Operating Officer (our “COO”).

 

Under the employment agreements, our officers, including the CEO, CFO, COO, VP Ops, EVP Corporate and CExO receive a base salary, extended benefits and are eligible for an annual performance-based bonus and long-term incentive awards determined at the discretion of our Board of Directors.

 

Certain of our officers, including the CEO, CFO, COO, VP Ops, EVP Corporate and CExO are also entitled, on termination without cause, including following a change of control, to twenty-four months’ salary and twice the average annual performance bonus earned in the three years immediately preceding termination.

 

The Company incurred $2,234 (C$3,170) associated with the departure of the former President and Chief Executive Officer. These costs were recorded to corporate administrative costs in the statement of earnings and were paid on April 30, 2020.

 

Costs associated with the resignation of the VP Ops were accrued in the amount of $1,642 (C$2,224) as at June 30, 2020. These costs were recorded to production costs in the statement of earnings and are payable after his final day with the Company.

 

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

 

The preparation of financial statements requires the use of accounting estimates. It also requires management to exercise judgment in the process of applying its accounting policies. Estimates and judgments are regularly evaluated and are based on management’s experience and other factors, including expectations about future events that are believed to be reasonable under the circumstances. The following discusses the most significant accounting judgments and accounting estimates that the Company has made in the preparation of the financial statements including those that could result in a material effect in the next financial year on the carrying amounts of assets and liabilities:

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Key accounting policy judgment

 

Impairment of mineral properties, plant and equipment

 

The application of the Company’s accounting policy for impairment of mineral properties, plant and equipment requires judgment to determine whether indicators of impairment exist. The review of impairment indicators includes consideration of both external and internal sources of information, including factors such as market and economic conditions, metal prices and forecasts, capital expenditure requirements, future operating costs and production volumes. Management has assessed impairment indicators for the Company’s mineral properties, plant and equipment and has concluded that no impairment indicators exist as of June 30, 2020.

 

Impairment of exploration and evaluation assets

 

The application of the Company’s accounting policy for impairment of exploration and evaluation assets requires judgment to determine whether indicators of impairment exist including factors such as, the period for which the Company has the right to explore, expected renewals of exploration rights, whether substantive expenditures on further exploration and evaluation of resource properties are budgeted and evaluation of the results of exploration and evaluation activities up to the reporting date. Management has assessed impairment indicators on the Company’s exploration and evaluation assets and has concluded that no impairment indicators exist as of June 30, 2020.

 

Sources of estimation uncertainty

 

Mineral Reserves and Resources

 

The Company estimates its mineral reserves and resources based on information compiled by qualified persons as defined in accordance with NI 43-101 requirements. The estimation of Mineral Reserves and Resources requires judgment to interpret available geological data, select an appropriate mining method and establish an extraction schedule. It also requires assumptions about future commodity prices, exchange rates, production costs and recovery rates. There are uncertainties inherent in estimating Mineral Reserves and Resources and assumptions that are valid at the time of estimation and may change significantly when new information becomes available. New geological data as well as changes in the above assumptions may change the economic status of reserves and may, ultimately, result in the reserves being revised.

 

The changes in the Proven and Probable Mineral Reserves announced on March 9, 2020 impacted the calculation of depreciation and depletion expense beginning in the first quarter of 2020.

 

NEW ACCOUNTING POLICIES

 

Our significant accounting policies are presented in Note 3 to the audited consolidated financial statements for the years ended December 31, 2019 and 2018. There were no new accounting policies adopted during the six months ended June 30, 2020.

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NEW ACCOUNTING STANDARDS AND RECENT PRONOUNCEMENTS

 

There are no IFRS standards or International Financial Reporting Interpretations Committee interpretations that are not yet effective or early adopted that are expected to have a material impact on the Company.

 

FINANCIAL INSTRUMENTS

 

Classification of financial assets

 

We have the following financial assets: cash and cash equivalents, receivables and other and restricted cash.

 

Cash and cash equivalents and restricted cash are classified at amortized cost. Interest income is recognized by applying the effective interest rate method.

 

The Company’s trade receivables result from sales transactions in accordance with IFRS 15, Revenue from Contracts with Customers and contain provisional pricing arrangements. These trade receivables are classified as fair value through profit or loss (“FVTPL”) with the gain (loss) included in revenue.

 

Classification of financial liabilities

 

We have the following financial liabilities: accounts payable and accrued liabilities which include lease obligations, the RSU liability, the DSU liability, the Loan Facility and the debt portion of the convertible notes.

 

Accounts payable and accrued liabilities, the Loan Facility and the debt portion of the convertible notes are classified as financial liabilities at amortized cost and are recognized initially at fair value, net of any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are held at amortized cost using the effective interest method.

 

The RSU liability and DSU liability are recorded at FVTPL and, accordingly, are recorded on the statement of financial position at fair value.

 

Financial risk management

 

The Company has exposure to a variety of financial risks: market risk (including currency risk, interest rate risk and commodity price risk), credit risk and liquidity risk from its use of financial instruments.

 

Risk management is the responsibility of management and is carried out under policies approved by the Board of Directors. Material risks are monitored and are regularly discussed with the Audit Committee and Board of Directors. The type of risk exposure and the way in which such exposure is managed is discussed below:

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Market risk

 

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and commodity prices will affect the Company’s cash flows or value of its financial instruments.

 

Currency risk

 

The Company is subject to currency risk on financial instruments which are denominated in currencies that are not the same as the functional currency of the entity that holds them. Exchange gains and losses would impact earnings.

 

The Company is exposed to currency risk through cash and cash equivalents, receivables and other excluding trade receivables, restricted cash and accounts payable and accrued liabilities which are denominated in CAD. The Company has not hedged its exposure to currency fluctuations at this time.

 

In addition to currency risk from financial instruments, a significant portion of the Company’s mine production costs, capital expenditures and corporate administrative costs are incurred in CAD. Consequently, fluctuations in the USD exchange rate against the CAD increases the volatility of cost of sales and corporate administrative costs.

 

Interest rate risk

 

The Company is subject to interest rate risk with respect to its investments in cash and cash equivalents. The Company’s current policy is to invest cash at floating rates of interest and cash reserves are to be maintained in cash and cash equivalents in order to maintain liquidity, while achieving a satisfactory return for shareholders. Fluctuations in interest rates when cash and cash equivalents mature impact interest income earned.

 

The Company is subject to interest rate risk with respect to its Loan Facility. Interest rates associated with this facility are based on LIBOR and the administrative agents’ base rate which fluctuate based on market conditions.

 

Commodity price risk

 

The Company is subject to commodity price risk from fluctuations in the market prices for gold and silver. Commodity price risks are affected by many factors that are outside the Company’s control including global or regional consumption patterns, the supply of and demand for metals, speculative activities, the availability and costs of metal substitutes, inflation and political and economic conditions.

 

The financial instruments impacted by commodity prices are trade receivables. Price adjustments are made in subsequent periods to the customer receivables for concentrate sales transactions based on movements in market prices prior to final pricing. As a result, concentrate sales receivables are fair valued and adjusted each period to reflect forward market prices to the estimated settlement date. The Company has not hedged the price of any commodity at this time.

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Credit risk

 

Credit risk is the risk of potential loss to the Company if the counterparty to a financial instrument fails to meet its contractual obligations. The Company’s credit risk is primarily attributable to its liquid financial assets including cash and cash equivalents, trade receivables and restricted cash.

 

The Company limits its exposure to credit risk on financial assets through investing its cash and cash equivalents and restricted cash with high-credit quality financial institutions. Management believes the risk of loss related to these deposits to be low. The Company continually evaluates changes in the status of its counterparties.

 

The Company is exposed to credit risk through its trade receivables, which are principally with internationally recognized counterparties. The Company sells its refined gold on spot contracts to financial institutions in Canada and its concentrates to trading companies. The Company sells its silver to refineries located in Canada and other jurisdictions and trading companies. The Company has had limited instances of default from its counterparties. The Company continually evaluates the counterparties to which it sells its product. The Company is not economically dependent on a limited number of customers for the sale of its gold and silver as its products can be sold through numerous world-wide commodity markets.

 

Liquidity risk

 

Liquidity risk is the risk that we will not be able to meet our financial obligations as they fall due. The Company manages liquidity risk by monitoring actual and projected cash flows and matching the maturity profile of financial assets and liabilities. Cash flow forecasting is performed regularly, and we try to ensure that there is sufficient capital in order to meet short-term business requirements, after taking into account cash flows from operations and our holdings of cash and cash equivalents. Our cash and cash equivalents are currently invested in business and savings accounts with financial institutions of high credit quality which are available on demand by us for our programs. To the extent we do not believe there is sufficient liquidity to meet obligations, we will consider drawing on the Loan Facility (to the extent available), securing additional debt and/or equity funding. For further discussion, refer to the “Liquidity and Capital Resources” section of this MD&A.

 

EVENTS AFTER REPORTING DATE

 

On August 1, 2020, Patrick Godin joined the Company as COO. Mr. Godin will succeed David Prins, the Company’s VP Ops.

 

On August 2, 2020 the Company reported a fatality resulting from an isolated incident that occurred at the Brucejack Mine. The Company is fully cooperating with the investigation of the incident.

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NON-IFRS FINANCIAL PERFORMANCE MEASURES

 

The Company has included certain non-IFRS measures in this MD&A. The Company believes that these measures, in addition to measures prepared in accordance with IFRS, provide readers an improved ability to evaluate the underlying performance of the Company and to compare it to information reported by other companies. The non-IFRS measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These measures do not have any standardized meaning prescribed under IFRS, and therefore may not be comparable to similar measures presented by other issuers.

 

Cost of sales per ounce of gold sold

 

The Company reports cost of sales on a gold ounce sold basis. Management uses this metric as a tool to monitor total operating cost performance which includes non-cash items such as depreciation and depletion and site share-based compensation.

 

The following table reconciles this non-IFRS measure to the most directly comparable IFRS measure disclosed in the financial statements.

 

   For the three months ended   For the six months ended 
In thousands of USD,  June 30,   June 30,   June 30,   June 30, 
except for per ounce data  2020   2019   2020   2019 
Gold ounces sold   96,047    85,953    176,508    167,387 
Cost of sales per ounce sold Reconciliation                    
Cost of sales  $106,555   $83,413   $196,060   $157,380 
Cost of sales per ounce of gold sold  $1,109   $970   $1,111   $940 

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Total cash costs

 

Total cash costs is a common financial performance measure in the gold mining industry but has no standard meaning. The Company reports total cash costs on a gold ounce sold basis. The Company believes that, in addition to measures prepared in accordance with IFRS, such as revenue, certain readers can use this information to evaluate the Company’s performance and ability to generate operating earnings and cash flow from its mining operations. Management uses this metric as an important tool to monitor operating cost performance.

 

Total cash costs include cost of sales such as mining, processing, surface services and other, mine general and administrative costs, royalties and selling costs and changes in inventories less non-cash depreciation and depletion, write-down of inventories, site share-based compensation and silver revenue divided by gold ounces sold to arrive at total cash costs per ounce of gold sold. Other companies may calculate this measure differently.

 

The following table reconciles this non-IFRS measure to the most directly comparable IFRS measure disclosed in the financial statements.

 

   For the three months ended   For the six months ended 
In thousands of USD,  June 30,   June 30,   June 30,   June 30, 
except for per ounce data  2020   2019   2020   2019 
Gold ounces sold   96,047    85,953    176,508    167,387 
Total cash costs reconciliation                    
Cost of sales  $106,555   $83,413   $196,060   $157,380 
Less: Depreciation and depletion   (32,636)   (20,650)   (57,214)   (36,741)
Less: Site share-based compensation   (516)   (919)   (345)   (1,503)
Less: Silver revenue   (1,432)   (1,490)   (3,244)   (2,958)
Total cash costs  $71,971   $60,354   $135,257   $116,178 
Total cash costs per ounce of gold sold  $749   $702   $766   $694 

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All-in sustaining costs

 

The Company believes that AISC more fully defines the total costs associated with producing gold. AISC is calculated based on the definitions published by the World Gold Council (“WGC”) (a market development organization for the gold industry comprised of and funded by 26 gold mining companies from around the world). The WGC is not a regulatory organization. The Company calculates AISC as the sum of total cash costs (as described above), sustaining capital expenditures (excluding expansion capital related to the 3,800 tonne per day expansion project), accretion on decommissioning and restoration provision, treatment and refinery charges, payments on lease obligations, site share-based compensation, and corporate administrative costs, all divided by the gold ounces sold to arrive at a per ounce amount.

 

Other companies may calculate this measure differently as a result of differences in underlying principles and policies applied. Differences may also arise due to a different definition of sustaining versus non-sustaining capital.

 

The following table reconciles this non-IFRS measure to the most directly comparable IFRS measure disclosed in the financial statements.

 

   For the three months ended   For the six months ended 
In thousands of USD,  June 30,   June 30,   June 30,   June 30, 
except for per ounce data  2020   2019   2020   2019 
Gold ounces sold   96,047    85,953    176,508    167,387 
All-in sustaining costs reconciliation                    
Total cash costs  $71,971   $60,354   $135,257   $116,178 
Sustaining capital expenditures (1)   5,225    7,967    11,192    11,629 
Accretion on decommissioning and restoration provision   69    120    158    264 
Treatment and refinery charges   3,636    5,698    7,631    10,750 
Payments on lease obligations   1,469    1,628    3,083    3,184 
Site share-based compensation   516    919    345    1,503 
Corporate administrative costs (2)   4,615    4,113    9,993    7,987 
Total all-in sustaining costs  $87,501   $80,799   $167,659   $151,495 
All-in sustaining costs per ounce of gold sold  $911   $940   $950   $905 
                     
(1)Sustaining capital expenditures includes deferred development costs.

 

(2)Includes the sum of corporate administrative costs per the statement of earnings and comprehensive earnings, excluding depreciation within those figures.

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Average realized price and average realized cash margin

 

Average realized price and average realized cash margin per ounce of gold sold are used by management and readers to better understand the gold price and cash margin realized throughout a period.

 

Average realized price is calculated as revenue from contracts with customers plus treatment and refinery charges included in concentrate revenue less silver revenue divided by gold ounces sold. Average realized cash margin represents average realized price per gold ounce sold less total cash costs and treatment and refinery charges per gold ounce sold.

 

The following table reconciles these non-IFRS measures to the most directly comparable IFRS measures disclosed in the financial statements.

 

   For the three months ended   For the six months ended 
In thousands of USD,  June 30,   June 30,   June 30,   June 30, 
except for per ounce data  2020   2019   2020   2019 
Revenue from contracts with customers  $164,688   $109,134   $291,622   $212,960 
Treatment and refining charges   3,636    5,698    7,631    10,750 
Less: Silver revenue   (1,432)   (1,490)   (3,244)   (2,958)
Gold revenue(1)  $166,892   $113,342   $296,009   $220,752 
Gold ounces sold   96,047    85,953    176,508    167,387 
Average realized price  $1,738   $1,319   $1,677   $1,319 
Less: Total cash costs per ounce of gold sold   (749)   (702)   (766)   (694)
Less: Treatment and refining charges per ounce of gold sold   (38)   (67)   (43)   (64)
Average realized cash margin per ounce of gold sold  $951   $550   $868   $561 
                     
(1)Gold revenue excludes the gain on trade receivables at fair value related to provisional pricing adjustments in the amount of $1,879 and $1,505 (2019 – 4,068 and $3,361) for the three and six months ended June 30, 2020, respectively.

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Adjusted earnings and adjusted basic earnings per share

 

Adjusted earnings and adjusted basic earnings per share are used by management and readers to measure the underlying operating performance of the Company. Presenting these measures helps and readers evaluate earning trends more readily in comparison with results from prior periods.

 

Adjusted earnings is defined as net earnings adjusted to exclude specific items that are significant, but not reflective of the underlying operations of the Company, including: loss on financial instruments at fair value (as applicable), amortization of Loan Facility transaction costs, accretion on convertible notes, and deferred income tax expense. Adjusted basic earnings per share is calculated using the weighted average number of shares outstanding under the basic method of earnings per share as determined under IFRS.

 

The following table reconciles these non-IFRS measures to the most directly comparable IFRS measures disclosed in the financial statements.

 

   For the three months ended   For the six months ended 
In thousands of USD,  June 30,   June 30,   June 30,   June 30, 
except for per share data  2020   2019   2020   2019 
Basic weighted average shares outstanding   186,085,641    184,400,998    185,744,251    184,297,426 
Adjusted earnings and adjusted basic earnings per share reconciliation                    
Net earnings for the period  $32,260   $10,443   $38,497   $14,609 
Adjusted for:                    
Loss on financial instruments at fair value   -    3,467    -    10,993 
Amortization of Loan Facility transaction costs   (790)   117    66    441 
Accretion on convertible notes   1,388    1,388    2,777    2,761 
Deferred income tax expense   16,326    1,598    33,707    4,736 
Adjusted earnings  $49,184   $17,013   $75,047   $33,540 
Adjusted basic earnings per share  $0.26   $0.09   $0.40   $0.18 

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Free cash flow

 

Free cash flow is calculated as cash generated from operating activities less cash used in investing activities. It provides useful information to management and readers as an indicator of the cash generated from the Company’s operations before consideration of how those activities are financed.

 

The following table reconciles this non-IFRS measure to the most directly comparable IFRS measures disclosed in the financial statements.

 

   For the three months ended   For the six months ended 
In thousands of USD,  June 30,   June 30,   June 30,   June 30, 
except for per share data  2020   2019   2020   2019 
Cash generated from operating activities   92,131    41,183    144,669    81,127 
Cash used in investing activities   (9,384)   (6,827)   (20,119)   (11,752)
Free cash flow  $82,747   $34,356   $124,550   $69,375 
                     

Working capital

 

Working capital is defined as current assets less current liabilities and provides useful information to management and readers about liquidity of the Company.

 

The following table reconciles this non-IFRS measure to the most directly comparable IFRS measure disclosed in the financial statements.

 

   June 30,   December 31, 
In thousand of USD  2020   2019 
Current assets  $157,455   $62,550 
Current liabilities(1)   125,156    129,355 
Working capital (deficit)  $32,299   $(66,805)
           
(1)As at June 30, 2020, current liabilities include the current portion of the Loan Facility in the amount of $66,667 (December 31, 2019 – $66,667).

 

OUTSTANDING SHARE DATA

 

As at August 5, 2020, the Company had the following number of securities outstanding:

 

   Number of   Exercise price  Exercise price  Weighted average 
   securities   ($)  currency  remaining life (years) 
Common shares   186,681,220          - 
Share options   1,861,273   $6.75 - $15.35  CAD   2.09 
Convertible notes   6,250,000   $16.00  USD   1.61 
RSUs(1)   674,799      CAD   2.07 
PSUs(1)   301,137      CAD   2.05 
    195,768,429            
                 
(1)The Company may settle RSUs and PSUs in cash or common shares of the Company, on a basis of one common share for each RSU and, depending on achievement of performance criteria, zero to two common shares for each PSU, as applicable.

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INTERNAL CONTROL OVER FINANCIAL REPORTING

 

Management with the participation of the former President and CEO and the Executive Vice President and CFO, assessed the effectiveness of our internal control over financial reporting as at December 31, 2019. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (COSO 2013).

 

Management, with the participation of the President and CEO and the Executive Vice President and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Any system of internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable, not absolute, assurance with respect to financial statement preparation and presentation.

 

There have been no significant changes in our internal controls during the six months ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

RISKS AND UNCERTAINTIES

 

Natural resources exploration, development and operation involves a number of risks and uncertainties, many of which are beyond our control. These risks and uncertainties include, without limitation, the risks discussed elsewhere in this MD&A and those identified in our Annual Information Form and Form 40-F, each dated February 21, 2020, for the year ended December 31, 2019, and our other disclosure documents as filed in Canada on SEDAR at www.sedar.com and in the United States through EDGAR at the SEC’s website at www.sec.gov (collectively, “the Pretivm Disclosure Documents”). You should carefully consider such risks and uncertainties prior to deciding to invest in our securities.

 

Public health crises, including COVID-19, could adversely affect our business.

 

Emerging infectious diseases or the threat of outbreaks of viruses or other contagions or epidemic diseases or pandemics, including the COVID-19 outbreak, could have a material adverse effect on the Company by causing operational and supply chain delays and disruptions (including as a result of government regulation and prevention measures), labour shortages and shutdowns, social unrest, breach of material contracts and customer agreements, government or regulatory actions or inactions, changes in tax laws, payment deferrals, increased insurance premiums, decreased demand or the inability to sell and deliver precious metals, declines in the price of precious metals, delays in permitting or approvals, governmental disruptions, capital markets volatility, or other unknown but potentially significant impacts. In addition, to date, a number of mining projects have been suspended as cases of COVID-19 have been confirmed, for precautionary purposes or as governments have declared a state of emergency or taken other actions. While there are no confirmed cases of COVID-19 at the Brucejack Mine as of August 5, 2020, and throughout the current pandemic, the Brucejack Mine has operated continuously under the strict guidance and directives of federal, provincial and regional health authorities, an outbreak of COVID-19 at the Brucejack Mine could result in significant disruption to operations, including a suspension of mine operations. The region in which we operate may not have sufficient public infrastructure to adequately respond or efficiently and quickly recover from such event, which could have a materially adverse effect on our operations. Our exposure to such public health crises also includes risks to employee health and safety. Our operation is located in a relatively remote and isolated area and represents a concentration of personnel working and residing in close proximity to one another. Should an employee or visitor become infected with a serious illness that has the potential to spread rapidly, this could place our workforce at risk.

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The full extent and impact of the COVID-19 outbreak is unknown and, to-date, has included extreme volatility in financial markets, a slowdown in economic activity, extreme volatility in commodity prices (including precious metals) and has raised the prospect of a global recession. The international response to the COVID-19 outbreak has led to significant restrictions on travel, temporary business closures, quarantines, global stock market volatility and a general reduction in global consumer activity. At this time, the Company cannot accurately predict what effects these conditions will have on mining operations or financial results, including due to uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and the length of the travel restrictions and business closures that have been or may be imposed by the governments of impacted countries. In addition, a significant outbreak of contagious diseases in the human population, such as COVID-19, could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could result in a material adverse effect on commodity prices, demand for metals, investor confidence, and general financial market liquidity, all of which may adversely affect the Company’s business and the market price of the Common Shares. Accordingly, any outbreak or threat of an outbreak of an epidemic disease or similar public health emergency, including the COVID-19 outbreak, could have a material adverse effect on the Company’s business, financial condition and results of operations. It is unknown whether and how the Company may be affected if a pandemic, such as the COVID-19 outbreak, persists for an extended period of time.

 

STATEMENT REGARDING FORWARD-LOOKING INFORMATION

 

This MD&A contains “forward-looking information”, “forward looking statements”, “future oriented financial information” and “financial outlook” within the meaning of applicable Canadian and United States securities legislation (collectively herein referred to as “forward-looking information”), including the “safe harbour” provisions of Canadian provincial securities legislation and the U.S. Private Securities Litigation Reform Act of 1995, Section 21E of the U.S. Securities Exchange Act of 1934, as amended, and Section 27A of the U.S. Securities Act of 1933, as amended. The purpose of disclosing future oriented financial information and financial outlook is to provide a general overview of management’s expectations regarding the anticipated results of operations including cash generated therefrom and costs thereof and readers are cautioned that future oriented financial information and financial outlook may not be appropriate for other purposes.

39

 

Wherever possible, words such as “plans”, “expects”, “guidance”, “projects”, “assumes”, “budget”, “strategy”, “scheduled”, “estimates”, “forecasts”, “anticipates”, “believes”, “intends”, “modeled”, “targets” and similar expressions or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved, or the negative forms of any of these terms and similar expressions, have been used to identify forward-looking information. Forward-looking information may include, but is not limited to, statements with respect to: the effects of the COVID-19 outbreak as a global pandemic, including anticipating operational and financial impacts and our response and contingency plans; production and financial guidance, and our expectations around achieving such guidance; our future operational and financial results, including estimated cash flows (including free cash flow forecasts) and the timing thereof; expectations around grade of gold and silver production; the Brucejack Mine production rate and gold recovery rate; capital modifications and upgrades, underground development and anticipated benefits thereof, and estimated expenditures and timelines in connection therewith, including with respect to maintaining a steady state production rate of, 3,800 tonnes per day; payment of debt, operating and other obligations and commitments including timing and source of funds; our mining (including mining methods), expansion, exploration and development activities, including the reverse circulation drill program, our infill, expansion and underground exploration drill programs and our grassroots exploration program, and the results, costs and timing thereof; our operational grade control program, including plans with respect to our infill drill program and our local grade control model; grade reconciliation, updated geological interpretation and mining initiatives with respect to the Brucejack Mine; our management, operational plans and strategy; capital, sustaining and operating cost estimates and timing thereof; the future price of gold and silver; our liquidity and the adequacy of our financial resources (including capital resources); our intentions with respect to our capital resources; capital allocation plans; our financing activities, including plans for the use of proceeds thereof; the estimation of Mineral Reserves and Mineral Resources, including any updates thereto; parameters and assumptions used to estimate Mineral Reserves and Mineral Resources; realization of Mineral Reserve and Mineral Resource estimates; our estimated LOM and LOM Plan for the Brucejack Mine; production and processing estimates and estimated rates; estimated economic results of the Brucejack Mine, including net cash flow and NPV; predicted metallurgical recoveries for gold and silver; geological and mineralization interpretations; development of our Brucejack Mine and timing thereof; results, analyses and interpretations of exploration and drilling programs; timelines and similar statements relating to the economic viability of the Brucejack Mine, including mine life, total tonnes mined and processed and mining operations; updates to our Mineral Reserves and Mineral Resources and LOM Plan for the Brucejack Mine, and the anticipated effects and timing thereof; timing, receipt, and anticipated effects of, and anticipated capital costs in connection with, approvals, consents and permits under applicable legislation; our executive compensation policy, approach and practice; our relationship with community stakeholders; litigation matters; environmental matters; payment of taxes, our effective tax rate and the recognition of our previously unrecognized income tax attributes; new accounting standards applicable to the Company, including methods of adoption and the effects of adoption of such standards; statements regarding USD cash flows, currency fluctuations and the recurrence of foreign currency translation adjustments; management and board of directors succession plans; the impact of financial instruments on our earnings; and the fatal incident at the Brucejack Mine, the investigation(s) of such incident and the findings and outcomes of such investigation(s). Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance are not statements of historical fact and may be forward-looking information.

40

 

Forward-looking information is subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual results, actions, events, conditions, performance or achievements to materially differ from those expressed or implied by the forward-looking information, including, without limitation, those related to:

 

uncertainty as to the outcome of legal proceedings;

 

the effect of indebtedness on cash flow and business operations;

 

the effect of a pandemic and particularly the COVID-19 outbreak as a global pandemic on the Company’s business, financial condition and results of operations and the impact of the COVID-19 outbreak on our workforce, suppliers and other essential resources and what effect those impacts, if they occur, would have on our business, financial condition and results of operations;

 

the effect of restrictive covenants pursuant to the Loan Facility;

 

assumptions regarding expected capital costs, operating costs and expenditures, production schedules, economic returns and other projections;

 

our production, grade of gold, milling recovery, cash flow and cost estimates, including the accuracy thereof;

 

commodity price fluctuations, including gold and silver price volatility;

 

the accuracy of our Mineral Resource and Reserve estimates (including with respect to size, grade and mining and milling recoverability) and the geological, operational costs and price assumptions on which they are based;

 

uncertainties relating to inferred Mineral Resources being converted into Measured or Indicated Mineral Resources;

 

our ability to maintain or increase our annual production of gold at the Brucejack Mine or discover, develop or acquire Mineral Reserves for production;

 

dependency on the Brucejack Mine for our future operating revenue;

 

the development of our properties and expansion of our operations;

 

our need or ability to raise enough capital to mine, develop, expand or complete further exploration programs on our mineral properties;

 

our ability to generate operating revenues and cash flow in the future;

 

failure of counterparties to perform their contractual obligations;

 

general economic conditions;

 

the inherent risks in the mining industry;

 

the commercial viability of our current and any acquired mineral rights;

 

availability of suitable infrastructure or damage to existing infrastructure;

 

transportation, processing and refining risks;

 

maintaining satisfactory labour relations with employees and contractors;

 

significant governmental regulations, including environmental regulations;

 

non-compliance with permits that are obtained or delay in obtaining or renewing, failure to obtain or renew permits required in the future;

 

increased costs and restrictions on operations due to compliance with health, safety and environmental laws and regulations;

 

compliance with emerging climate change regulation and the detrimental effects of climate change;

 

adequate internal control over financial reporting;

 

various tax-related matters;

 

potential opposition from non-governmental organizations;

41

 

uncertainty regarding unsettled First Nations rights and title in British Columbia;

 

maintaining our social license to operate;

 

uncertainties related to title to our mineral properties and surface rights;

 

land reclamation and mine closure requirements;

 

our ability to identify and successfully integrate any material properties we acquire;

 

currency exchange rate fluctuations;

 

competition in the mining industry for properties, qualified personnel and management;

 

our ability to attract and retain qualified management and personnel;

 

disruption from changes in management team or failure to successfully transition new hires or promoted employees into their roles;

 

the ability of our new executives to successfully transitions into their roles;

 

some of our directors’ and officers’ involvement with other natural resource companies;

 

potential inability to attract development partners or our ability to identify attractive acquisitions;

 

compliance with foreign corrupt practices regulations and anti-bribery laws;

 

changes to rules and regulations, including accounting practices;

 

limitations in our insurance coverage and the ability to insure against certain risks;

 

risks related to ensuring the security and safety of information systems, including cyber security risks;

 

our anti-takeover provisions could discourage potentially beneficial third-party takeover offers;

 

significant growth could place a strain on our management systems;

 

share ownership by our significant shareholders and their ability to influence our operations and governance and, in case of sales of our shares by such significant shareholders, our share price;

 

failure to comply with certain terms of the convertible notes;

 

reputational risks;

 

future sales or issuances of our debt or equity securities;

 

the trading price of our common shares is subject to volatility due to market conditions;

 

our ability to pay dividends in the foreseeable future; and

 

certain actions under U.S. federal securities laws may be unenforceable.

 

This list is not exhaustive of the factors that may affect any of our forward-looking information. Although we have attempted to identify important factors that could cause actual results, actions, events, conditions, performance or achievements to differ materially from those contained in forward-looking information, there may be other factors that cause results, actions, events, conditions, performance or achievements to differ from those anticipated, estimated or intended.

42

 

Our forward-looking information is based on the assumptions, beliefs, expectations and opinions of management on the date the statements are made, many of which may be difficult to predict and beyond our control. In connection with the forward-looking information contained in this MD&A, we have made certain assumptions about, among other things: our business and operations and that no significant event will occur outside of our normal course of business and operations (other than as expressly set out herein); planned exploration, development and production activities and the results, costs and timing thereof; future price of gold and silver and other metal prices; the accuracy of our Mineral Resource and Mineral Reserve estimates and related information, analyses and interpretations (including with respect to any updates or anticipated updates); the geology and mineralization of the Brucejack Project; operating conditions; capital and operating cost estimates; production and processing estimates; the results, costs and timing of future exploration and drilling; timelines and similar statements relating to the economic viability of the Brucejack Mine; timing and receipt of governmental, regulatory and third party approvals, consents, licenses and permits; obtaining required renewals for existing approvals, consents, licenses and permits; the geopolitical, economic, permitting and legal climate that we operate in; the adequacy of our financial resources, and our ability to raise any necessary additional capital on reasonable terms; our ability to satisfy the terms and conditions of our debt obligations; commodity prices; currency exchange rates and interest rates; political and regulatory stability; requirements under applicable laws; market competition; sustained labour stability and availability of equipment; positive relations with local groups; favourable equity and debt capital markets; stability in financial capital markets; and the impact of the COVID-19 outbreak. Although we believe that the assumptions inherent in forward-looking information are reasonable as of the date of this MD&A, these assumptions are subject to significant business, social, economic, political, regulatory, competitive and other risks and uncertainties, contingencies and other factors that could cause actual actions, events, conditions, results, performance or achievements to be materially different from those projected in the forward-looking information. The Company cautions that the foregoing list of assumptions is not exhaustive. Other events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking information contained in this MD&A.

 

Additional information about the risks and uncertainties concerning forward-looking information and material factors or assumptions on which such forward-looking information is based is provided in our Annual Information Form and Form 40-F, each dated February 21, 2020, for the year ended December 31, 2019, our MD&A for the years ended December 31, 2019 and 2018, and other Pretivm Disclosure Documents.

 

Forward-looking information is not a guarantee of future performance. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Forward-looking information involves statements about the future and is inherently uncertain, and our actual achievements or other future events or conditions may differ materially from those reflected in the forward-looking information due to a variety of risks, uncertainties and other factors, including, without limitation, those referred to in this MD&A and the Pretivm Disclosure Documents. For the reasons set forth above, readers should not place undue reliance on forward-looking information.

 

We do not assume any obligation to update forward-looking information, whether as a result of new information, future events or otherwise, other than as required by applicable law. For the reasons set forth above, prospective investors should not place undue reliance on forward-looking information.

43

 

CAUTIONARY NOTE TO UNITED STATES INVESTORS

 

Disclosure regarding our mineral properties, including with respect to Mineral Reserve and Mineral Resource estimates, in this MD&A was prepared in accordance with NI 43-101. NI 43-101 is a rule developed by the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. NI 43-101 differs significantly from the disclosure requirements of the SEC generally applicable to U.S. companies. For example, the terms “mineral reserve”, “proven mineral reserve”, “probable mineral reserve”, “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are defined in NI 43-101. These definitions differ from the definitions in the disclosure requirements promulgated by the SEC. Accordingly, information contained in this MD&A will not be comparable to similar information made public by U.S. companies reporting pursuant to SEC disclosure requirements.

44

EX-99.3 4 ex99-3.htm NEWS RELEASE DATED AUGUST 5, 2020
 

 

Exhibit 99.3

 

(PRETIUM RESOURCES INC LOGO)
   
August 5, 2020 News Release 20-15
   

Pretivm Reports Second Quarter 2020 Operating and Financial Results;

 

Strong Production at Brucejack Generates Record Free Cash Flow

 

Second Quarter (“Q2”) and First Six Months (“H1”) 2020 Highlights:

 

Gold production – Q2: 90,419 ounces; H1: 173,307 ounces

 

AISC1 – Q2: $911 per ounce of gold sold; H1: $950 per ounce of gold sold

 

Free cash flow1 – Q2: $82.7 million; H1: $124.6 million

 

Uninterrupted operations through the COVID-19 pandemic

 

Achieved production milestone of one million ounces of gold

 

End of quarter cash balance: $124.7 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 (“MD & A”) for the three and six months ended June 30, 2020 and 2019 available on the Company’s website and on SEDAR and EDGAR.

 

Vancouver, British Columbia, August 5, 2020; Pretium Resources Inc. (TSX/NYSE:PVG) (“Pretivm” or the “Company”) announces operating and financial results for the second quarter and first-half 2020 (see “Key Operating Metrics” and “Key Financial Metrics” tables below).

 

“Brucejack delivered another profitable quarter with record free cash flow,” said Jacques Perron, President and Chief Executive Officer of Pretivm. “In the first six months of the year the mine produced 173,307 ounces of gold generating $293.1 million in revenue and $124.6 million in free cash flow, surpassing our full-year free cash flow target.”

 

“However, no quarter at Pretivm is considered a success unless it is accomplished safely. The loss of one of our employees, announced a few days ago, is a tragic reminder of the importance of safety in all mine operations. Our thoughts are with the employee’s family and loved ones. We will work tirelessly to ensure a safe workplace for everyone at Brucejack, which will directly support our efforts to operate efficiently and profitably.”

 

 
1Refer to the “Non-IFRS Financial Performance Measures” section at the end of this news release for reconciliation.

 

2020 Guidance

 

2020 Production Guidance Maintained

 

The Company produced 173,307 ounces of gold during the first half 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 for the remainder of 2020 at an average rate of approximately 3,500 tonnes per day due to planned shutdowns and an increased focus on waste management from accelerated lateral development. 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%.

 

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.

- 1 -

 

2020 Financial Guidance Updated

 

Total cash costs and all-in sustaining costs (“AISC”) were $766 and $950 per ounce of gold sold, respectively, for the first half of 2020. Annual financial guidance for 2020 has been updated to include costs for COVID-19 protocols, which are expected to remain in place for the remainder of 2020, of approximately $15.0 million and additional drilling of approximately $6.5 million. Accordingly, we have adjusted our cash costs guidance upwards to a range of $750 to $860 per ounce of gold sold from $725 to $830 per ounce of gold sold and AISC guidance upwards to a range of $960 to $1,120 per ounce of gold sold from $910 to $1,060 per ounce of gold sold.

 

AISC estimates continue to 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 a high-density reverse circulation (“RC”) drilling grade control program and definition drilling to increase the volume of grade information necessary to enhance mine planning and optimize gold production.

 

Sustaining capital expenditures for the year are expected to be approximately $40.0 million, an increase from $30.0 million, primarily due to additional definition drilling and mill building repairs. Other capital expenditures include approximately $15.0 million in expansion capital expenditures and approximately $10.0 million for regional exploration.

 

2020 Free Cash Flow Forecast Updated

 

Free cash flow for the first half of 2020 was $124.6 million at an average realized gold price[1] of $1,677 per ounce. With improved gold prices, our free cash flow forecast for 2020 has been modified to a range of $205 million to $275 million based on an average gold price of $1,800 per ounce. This compares with our prior forecast of $100 million to $170 million based on an average gold price of $1,450 per ounce. If gold prices were to decrease to $1,600 per ounce, the low end of our free cash flow forecast would be $175 million.

 

During the quarter, as a precautionary measure in response to the continuing operational risks related to COVID-19, the Company drew down $16.0 million of the revolving portion of the Loan Facility to increase available liquidity. The Company will focus on preserving liquidity while we operate under the COVID-19 safety protocols.

 

Impact of COVID-19

 

The Company’s primary commitment is the safety and health of our workforce and neighbouring communities in northwest British Columbia. There were no cases of COVID-19 identified at the Brucejack Mine as of August 5, 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 (March 23, 2020); and Northern Health COVID-19: Interim Guidelines for Industrial Camps (March 25, 2020). The Company has developed management plans to mitigate the spread of COVID-19 and protect the well-being of our employees, communities and other stakeholders.

 

The Company incurred $4.7 million of additional production costs during the quarter related to employee salaries and travel costs 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.

 

 
1Refer to the “Non-IFRS Financial Performance Measures” section at the end of this news release for reconciliation.

- 2 -

 

Second Quarter and Half-Year 2020 Operating and Financial Highlights

 

Key Operating Metrics

 

   3 months ended Jun. 30,   6 months ended Jun. 30, 
   2020   2019   2020   2019 
Gold produced (oz)   90,419    90,761    173,307    169,941 
Head grade (g/t gold)   8.9    8.9    8.3    8.8 
Gold Recovery (%)   96.7    96.9    96.6    96.9 
Silver produced (oz)   109,332    135,797    233,258    244,031 
Gold sold (oz)   96,047    85,953    176,508    167,387 
Silver sold (oz)   83,642    104,442    198,282    201,416 
Ore mined (wet tonnes)   352,594    337,044    710,268    645,431 
Mining rate (tpd)   3,875    3,704    3,903    3,566 
Ore milled (dry tonnes)   327,262    324,171    672,401    619,293 
Mill throughput (tpd)   3,596    3,562    3,695    3,422 

 

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

 

Key Financial Metrics

 

   3 months ended Jun. 30,   6 months ended Jun. 30, 
In thousands of USD, except for per ounce data  2020   2019   2020   2019 
Revenue   166,567    113,202    293,127    216,321 
Cost of sales ($)   106,555    83,413    196,060    157,380 
Cost of sales ($/oz of gold sold)1   1,109    970    1,111    940 
Earnings from mine operations ($)   60,012    29,789    97,067    58,941 
Net earnings ($)   32,260    10,443    38,497    14,609 
Net earnings ($/share)   0.18    0.06    0.21    0.08 
Adjusted earnings ($)1,2   49,184    17,013    75,047    33,540 
Adjusted earnings ($/share)1,2   0.26    0.09    0.40    0.18 
Cash generated by operating activities ($)   92,131    41,183    144,669    81,127 
Free cash flow ($)1   82,747    34,356    124,550    69,375 
AISC ($/oz)1   911    940    950    905 
Average realized price ($/oz)1   1,738    1,319    1,677    1,319 
Average realized cash margin ($/oz)1   951    550    868    561 
Long-term debt ($)3   382,763    496,507    382,763    496,507 
Cash & cash equivalents ($)   124,734    34,281    124,734    34,281 
                     

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: 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 June 30, 2020, long-term debt does not include the current portion of the Company’s Loan Facility in the amount of $66,667. In the comparable period in 2019, long-term debt does not include the current portion of the Company’s Loan Facility and Offtake Obligation in the amount of $75,069.

- 3 -

 

Second Quarter 2020 Production Overview

 

Production totaled 90,419 ounces of gold and 109,332 ounces of silver in the second quarter 2020, on track to achieve 2020 annual guidance. Gold production was similar to 2019, when 90,716 ounces of gold and 135,797 ounces of silver were produced. COVID-19 did not directly affect second quarter gold production.

 

In May 2020, the Brucejack Mine achieved a major milestone with the safe and profitable production of its one millionth ounce of gold since the first gold pour in 2017.

 

In the second quarter, a total of 327,262 tonnes of ore, equivalent to a throughput rate of 3,596 tonnes per day, were processed. This was an increase from the comparable period in 2019, in which a total of 324,171 tonnes of ore, equivalent to a throughput rate of 3,562 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, focus on lateral development and stope availability. In the comparable period in 2019, the mill was in the early phases of 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 8.9 grams per tonne gold for the second quarter of 2020 equivalent to 2019.

 

Gold recovery for the second quarter of 2020 was 96.7% compared to 96.9% in the comparable period in 2019.

 

In the second quarter, 352,594 wet tonnes of ore were mined, equivalent to a mining rate of 3,875 tonnes per day. In the comparable period in 2019, 337,044 wet tonnes of ore, equivalent to a mining rate of 3,704 tonnes per day.

 

We continued our lateral development at a targeted rate of approximately 1,000 meters per month. During the three months ended June 30, 2020, a total 3,224 meters of lateral development and 43 meters of vertical development were completed.

 

The RC drilling grade control program was introduced in staggered phases, with the first drill in operation at the beginning of the second quarter on the 1080-meter level. Towards the end of the quarter, as the equipment and personnel became available, a second and third RC drill were commissioned and commenced drilling on the 1140-meter level. A total of 22,164 meters of RC drilling were completed during the quarter.

 

All diamond drilling activity was put on hold at the onset of the COVID-19 pandemic at the end of the first quarter to limit non-essential personnel at Brucejack. By the end of the second quarter, diamond drilling activity had resumed with four diamond drills on site conducting resource and infill drilling. Diamond drilling in the second quarter targeted reserves proximal to mine infrastructure to build stope inventory and provide flexibility for near term mining.

 

Infill diamond drilling in the second half of 2020 is planned 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 of 2021. Drilling is also planned to continue to the north toward the West Zone and will target Inferred Resources and previously intersected mineralization outside of the current Mineral Resource.

- 4 -

 

Second Quarter 2020 Financial Overview

 

In the second quarter, the Company generated revenue of $166.6 million, which included $164.7 million of revenue from contracts with customers plus a gain on trade receivables at fair value related to provisional pricing adjustments of $1.9 million. During the comparable period in 2019, the Company generated revenue of $113.2 million which included $109.1 million of revenue from contracts with customers and a gain on trade receivables at fair value related to provisional pricing adjustments of $4.1 million. The increase in revenue was primarily the result of higher gold prices and higher gold ounces sold in the period due to the timing of production and subsequent sales.

 

In the second quarter 2020, the Company sold 96,047 ounces of gold at an average realized price of $1,738 per ounce, generating $163.3 million in revenue from contracts with customers. In the comparable period in 2019, the Company sold 85,953 ounces of gold at an average realized price of $1,319 per ounce, generating $107.6 million in revenue from contracts with customers. The average London Bullion Market Association AM and PM market price over the three months ended June 30, 2020 was $1,711 (2019 – $1,309) per ounce of gold.

 

Total cost of sales for the second quarter 2020 was $106.6 million or $1,109 per ounce of gold sold1 compared to $83.4 million or $970 per ounce of gold sold in the comparable period in 2019. Cost of sales increased primarily due to higher production costs for employee salaries and travel costs related to COVID-19 protocols, as well as higher depreciation and depletion expenses.

 

In the second quarter, production costs, after adjustments for changes in inventories, were $68.1 million compared to $57.2 million in the comparable period in 2019. Production costs include mining, processing, surface services and other and mine general and administrative costs.

 

Total cash costs for the second quarter 2020 was $749 per ounce of gold sold[2] compared to $702 per ounce of gold sold in the comparable period in 2019. Total cash costs increased due to higher production costs related to employee salaries and travel costs associated with COVID-19 safety protocols.

 

AISC for the second quarter 2020 totaled $911 per ounce of gold sold compared to $940 per ounce of gold sold in the comparable period in 2019. AISC decreased primarily due to higher gold ounces sold offset by increased total cash costs.

 

In the second quarter, the Company incurred $5.2 million on sustaining capital expenditures compared to $8.0 million the comparable period in 2019. Significant sustaining capital expenditures during the period included the construction of the new bulk gravity lab ($1.0 million), the purchase of a 120-tonne crane ($0.9 million) and capitalized development costs ($0.7 million). In the comparable period in 2019, sustaining capital expenditures were focused on the purchase of underground drills and capitalized development costs.

 

Vertical development costs, including the costs to build new ventilation raises and access ramps that enable the Company to physically access ore underground on multiple mining levels, are capitalized. All costs associated with lateral development to access ore zones in preparation for mining are expensed.

 

 
1Refer to the “Non-IFRS Financial Performance Measures” section at the end of this news release for reconciliation.

- 5 -

 

Earnings from mine operations were $60.0 million in the second quarter 2020 compared to $29.8 million in the second quarter 2019.

 

Net earnings in the second quarter 2020 were $32.3 million compared to $10.4 million in the second quarter 2019 with the increase primarily resulting from more ounces sold at higher gold prices, a decrease in interest and finance expense offset by an increase in production costs, depreciation and depletion expense and deferred income tax expense.

 

Adjusted earnings1 were $49.2 million in the second quarter 2020 compared to $17.0 million in the second quarter 2019.

 

Cash generated from operating activities in the second quarter 2020 was $92.1 million compared to $41.2 million in the second quarter 2019.

 

Free cash flow1 generated in the second quarter 2020 was $82.7 million compared to $34.4 million in the second quarter 2019.

 

Average realized cash margin1 in the second quarter 2020 was $951 per ounce of gold sold compared to $550 per ounce of gold sold in the second quarter of 2019.

 

Cash and cash equivalents were $124.7 million as at June 30, 2020 increasing by $101.6 million from $23.2 million as at December 31, 2019.

 

The Company repaid $16.7 million of its $480.0 million senior secured loan facility (the “Loan Facility”). During the quarter, as a precautionary measure to increase available liquidity, the Company drew down $16.0 million of the revolving portion of the Loan Facility. At the end of the second quarter 2020 the outstanding balance on the Loan Facility was $364.7 million.

 

Regional Grassroots Exploration

 

The 2020 regional exploration program on the Company’s Bowser Claims is currently underway with crew and equipment mobilized to site. The exploration program is evaluating several distinct zones that have the potential to host Eskay Creek-style volcanogenic massive sulphide deposits and high-grade, epithermal related gold systems.

 

The primary focus of the 2020 program is the A6 Zone, located approximately 14 kilometers northeast of Brucejack. To follow up on the results of the 2019 program, 10,000 meters of drilling is planned to target Eskay Creek-style volcanogenic massive sulphide mineralization.

 

The 2020 program will also include drilling at the Koopa Zone, located 30 kilometers east-southeast of Brucejack, the Hanging Glacier Zone, located 4.5 kilometers northwest of Brucejack, and the East Snowfield Zone, located 6 kilometers north of Brucejack. In 2019, drilling at Koopa intersected wide intervals of low-grade, structurally-controlled epithermal-style gold mineralization. In 2020, 1,500 meters of drilling is planned to target deeper, potentially higher-grade parts of the system. At Hanging Glacier, 1,200 meters of drilling is planned to test an area where assay results from soil and prospecting samples returned anomalous gold values. At East Snowfield, 1,000 meters of drilling is planned to test a high-grade gold structure intersected during previous drilling campaigns.

 

The grassroots exploration program will continue through the summer and also include soil sampling, prospecting, regional mapping and hyperspectral imaging.

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Qualified Persons

 

Lyle Morgenthaler, B.A.Sc., P.Eng., Chief Mine Engineer, Pretium Resources Inc. is the Qualified Person (“QP”) 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.

 

Kenneth C. McNaughton, M.A.Sc., P.Eng., Pretivm’s Vice President and Chief Exploration Officer is the QP responsible for the regional grass-roots 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 six months ended June 30, 2020 and 2019 are filed on SEDAR and EDGAR and are available on our website at www.pretivm.com.

 

Webcast and Conference Call

 

The webcast and conference call to discuss the second quarter 2020 operating and financial results and updates will take place Thursday, August 6, 2020 at 8:30 am PT (11:30 am ET).

 

Webcast and conference call details:

 

Thursday, August 6, 2020 at 8:30 am PT (11:30 am ET)
Webcast www.pretivm.com
Toll Free (North America) 1-800-319-4610
International and Vancouver 604-638-5340
   

A recorded playback will be available until August 20, 2020:

 

Toll Free (North America) 1-800-319-6413
Access Code 4889
   

About Pretivm

 

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

 

For further information contact:
Troy Shultz
Manager, Investor Relations &
Corporate Communications

 

Pretium Resources Inc.
Suite 2300, Four Bentall Centre, 1055 Dunsmuir Street
PO Box 49334 Vancouver, BC V7X 1L4
(604) 558-1784
invest@pretivm.com
(SEDAR filings: Pretium Resources Inc.)

 

Non-IFRS Financial Performance Measures

 

The Company has included certain non-IFRS measures in this new release. Refer to the Company’s MD&A for an explanation, discussion and reconciliation of non-IFRS measures. The Company believes that these measures, in addition to measures prepared in accordance with International Financial Reporting Standards (“IFRS”), provide readers with an improved ability to evaluate the underlying performance of the Company and to compare it to information reported by other companies. The non-IFRS measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These measures do not have any standardized meaning prescribed under IFRS, and therefore may not be comparable to similar measures presented by other issuers.

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Forward-Looking Information

 

This news release contains “forward-looking information”, “forward looking statements”, “future oriented financial information” and “financial outlook” within the meaning of applicable Canadian and United States securities legislation (collectively herein referred to as “forward-looking information”), including the “safe harbour” provisions of Canadian provincial securities legislation and the U.S. Private Securities Litigation Reform Act of 1995, Section 21E of the U.S. Securities Exchange Act of 1934, as amended, and Section 27A of the U.S. Securities Act of 1933, as amended. The purpose of disclosing future oriented financial information and financial outlook is to provide a general overview of management’s expectations regarding the anticipated results of operations including cash generated therefrom and costs thereof and readers are cautioned that future oriented financial information and financial outlook may not be appropriate for other purposes.

 

Wherever possible, words such as “plans”, “expects”, “guidance”, “projects”, “assumes”, “budget”, “strategy”, “scheduled”, “estimates”, “forecasts”, “anticipates”, “believes”, “intends”, “modeled”, “targets” and similar expressions or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved, or the negative forms of any of these terms and similar expressions, have been used to identify forward-looking information. Forward-looking information may include, but is not limited to, statements with respect to: the effects of the COVID-19 outbreak as a global pandemic, including anticipating operational and financial impacts and our response and contingency plans; production and financial guidance, and our expectations around achieving such guidance; our future operational and financial results, including estimated cash flows (including free cash flow forecasts) and the timing thereof; expectations around grade of gold and silver production; the Brucejack Mine production rate and gold recovery rate; capital modifications and upgrades, underground development and anticipated benefits thereof, and estimated expenditures and timelines in connection therewith, including with respect to maintaining a steady state production rate of, 3,800 tonnes per day; payment of debt, operating and other obligations and commitments including timing and source of funds; our mining (including mining methods), expansion, exploration and development activities, including the reverse circulation drill program, our infill, expansion and underground exploration drill programs and our grassroots exploration program, and the results, costs and timing thereof; our operational grade control program, including plans with respect to our infill drill program and our local grade control model; grade reconciliation, updated geological interpretation and mining initiatives with respect to the Brucejack Mine; our management, operational plans and strategy; capital, sustaining and operating cost estimates and timing thereof; the future price of gold and silver; our liquidity and the adequacy of our financial resources (including capital resources); our intentions with respect to our capital resources; capital allocation plans; our financing activities, including plans for the use of proceeds thereof; the estimation of Mineral Reserves and Mineral Resources, including any updates thereto; parameters and assumptions used to estimate Mineral Reserves and Mineral Resources; realization of Mineral Reserve and Mineral Resource estimates; our estimated life of mine and life of mine plan for the Brucejack Mine; production and processing estimates and estimated rates; estimated economic results of the Brucejack Mine, including net cash flow and net present value; predicted metallurgical recoveries for gold and silver; geological and mineralization interpretations; development of our Brucejack Mine and timing thereof; results, analyses and interpretations of exploration and drilling programs; timelines and similar statements relating to the economic viability of the Brucejack Mine, including mine life, total tonnes mined and processed and mining operations; updates to our Mineral Reserves and Mineral Resources and life of mine plan for the Brucejack Mine, and the anticipated effects and timing thereof; timing, receipt, and anticipated effects of, and anticipated capital costs in connection with, approvals, consents and permits under applicable legislation; our executive compensation policy, approach and practice; our relationship with community stakeholders; litigation matters; environmental matters; payment of taxes, our effective tax rate and the recognition of our previously unrecognized income tax attributes; new accounting standards applicable to the Company, including methods of adoption and the effects of adoption of such standards; statements regarding United States dollar cash flows, currency fluctuations and the recurrence of foreign currency translation adjustments; management and board of directors succession plans; the impact of financial instruments on our earnings; and the fatal incident at the Brucejack Mine, the investigation(s) of such incident and the findings and outcomes of such investigation(s). Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance are not statements of historical fact and may be forward-looking information.

- 8 -

 

Forward-looking information is subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual results, actions, events, conditions, performance or achievements to materially differ from those expressed or implied by the forward-looking information, including, without limitation, those related to:; uncertainty as to the outcome of legal proceedings; the effect of indebtedness on cash flow and business operations; the effect of a pandemic and particularly the COVID-19 outbreak as a global pandemic on the Company’s business, financial condition and results of operations and the impact of the COVID-19 outbreak on our workforce, suppliers and other essential resources and what effect those impacts, if they occur, would have on our business, financial condition and results of operations; the effect of restrictive covenants pursuant to the Loan Facility; assumptions regarding expected capital costs, operating costs and expenditures, production schedules, economic returns and other projections; our production, grade of gold, milling recovery, cash flow and cost estimates, including the accuracy thereof; commodity price fluctuations, including gold and silver price volatility; the accuracy of our Mineral Resource and Reserve estimates (including with respect to size, grade and mining and milling recoverability) and the geological, operational costs and price assumptions on which they are based; uncertainties relating to inferred Mineral Resources being converted into Measured or Indicated Mineral Resources; our ability to maintain or increase our annual production of gold at the Brucejack Mine or discover, develop or acquire Mineral Reserves for production; dependency on the Brucejack Mine for our future operating revenue; the development of our properties and expansion of our operations; our need or ability to raise enough capital to mine, develop, expand or complete further exploration programs on our mineral properties; our ability to generate operating revenues and cash flow in the future; failure of counterparties to perform their contractual obligations; general economic conditions; the inherent risks in the mining industry; the commercial viability of our current and any acquired mineral rights; availability of suitable infrastructure or damage to existing infrastructure; transportation, processing and refining risks; maintaining satisfactory labour relations with employees and contractors; significant governmental regulations, including environmental regulations; non-compliance with permits that are obtained or delay in obtaining or renewing, failure to obtain or renew permits required in the future; increased costs and restrictions on operations due to compliance with health, safety and environmental laws and regulations; compliance with emerging climate change regulation and the detrimental effects of climate change; adequate internal control over financial reporting; various tax-related matters; potential opposition from non-governmental organizations; uncertainty regarding unsettled First Nations rights and title in British Columbia; maintaining our social license to operate; uncertainties related to title to our mineral properties and surface rights; land reclamation and mine closure requirements; our ability to identify and successfully integrate any material properties we acquire; currency exchange rate fluctuations; competition in the mining industry for properties, qualified personnel and management; our ability to attract and retain qualified management and personnel; disruption from changes in management team or failure to successfully transition new hires or promoted employees into their roles; some of our directors’ and officers’ involvement with other natural resource companies; potential inability to attract development partners or our ability to identify attractive acquisitions; compliance with foreign corrupt practices regulations and anti-bribery laws; changes to rules and regulations, including accounting practices; limitations in our insurance coverage and the ability to insure against certain risks; risks related to ensuring the security and safety of information systems, including cyber security risks; our anti-takeover provisions could discourage potentially beneficial third-party takeover offers; significant growth could place a strain on our management systems; share ownership by our significant shareholders and their ability to influence our operations and governance and, in case of sales of our shares by such significant shareholders, our share price; failure to comply with certain terms of the convertible notes; reputational risks; future sales or issuances of our debt or equity securities; the trading price of our common shares is subject to volatility due to market conditions; our ability to pay dividends in the foreseeable future; and certain actions under United States federal securities laws may be unenforceable. This list is not exhaustive of the factors that may affect any of our forward-looking information. Although we have attempted to identify important factors that could cause actual results, actions, events, conditions, performance or achievements to differ materially from those contained in forward-looking information, there may be other factors that cause results, actions, events, conditions, performance or achievements to differ from those anticipated, estimated or intended.

- 9 -

 

Our forward-looking information is based on the assumptions, beliefs, expectations and opinions of management on the date the statements are made, many of which may be difficult to predict and beyond our control. In connection with the forward-looking information contained in this news release, we have made certain assumptions about, among other things: our business and operations and that no significant event will occur outside of our normal course of business and operations (other than as expressly set out herein); planned exploration, development and production activities and the results, costs and timing thereof; future price of gold and silver and other metal prices; the accuracy of our Mineral Resource and Mineral Reserve estimates and related information, analyses and interpretations (including with respect to any updates or anticipated updates); the geology and mineralization of the Brucejack Project; operating conditions; capital and operating cost estimates; production and processing estimates; the results, costs and timing of future exploration and drilling; timelines and similar statements relating to the economic viability of the Brucejack Mine; timing and receipt of governmental, regulatory and third party approvals, consents, licenses and permits; obtaining required renewals for existing approvals, consents, licenses and permits; the geopolitical, economic, permitting and legal climate that we operate in; the adequacy of our financial resources, and our ability to raise any necessary additional capital on reasonable terms; our ability to satisfy the terms and conditions of our debt obligations; commodity prices; currency exchange rates and interest rates; political and regulatory stability; requirements under applicable laws; market competition; sustained labour stability and availability of equipment; positive relations with local groups; favourable equity and debt capital markets; stability in financial capital markets; and the impact of the COVID-19 outbreak. Although we believe that the assumptions inherent in forward-looking information are reasonable as of the date of this news release, these assumptions are subject to significant business, social, economic, political, regulatory, competitive and other risks and uncertainties, contingencies and other factors that could cause actual actions, events, conditions, results, performance or achievements to be materially different from those projected in the forward-looking information. The Company cautions that the foregoing list of assumptions is not exhaustive. Other events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking information contained in this news release.

 

Additional information about the risks and uncertainties concerning forward-looking information and material factors or assumptions on which such forward-looking information is based is provided in our Annual Information Form and Form 40-F, each dated February 21, 2020, for the year ended December 31, 2019, our MD&A for the years ended December 31, 2019 and 2018, and our other disclosure documents as filed in Canada on SEDAR at www.sedar.com and in the United States through EDGAR at the Security and Exchange Commission’s (the “SEC”) website at www.sec.gov (collectively, “the Pretivm Disclosure Documents”).

- 10 -

 

Forward-looking information is not a guarantee of future performance. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Forward-looking information involves statements about the future and is inherently uncertain, and our actual achievements or other future events or conditions may differ materially from those reflected in the forward-looking information due to a variety of risks, uncertainties and other factors, including, without limitation, those referred to in this news release and the Pretivm Disclosure Documents. For the reasons set forth above, readers should not place undue reliance on forward-looking information.

 

We do not assume any obligation to update forward-looking information, whether as a result of new information, future events or otherwise, other than as required by applicable law. For the reasons set forth above, prospective investors should not place undue reliance on forward-looking information. Neither the TSX nor the NYSE has approved or disapproved of the information contained herein.

 

Cautionary Notes to United States Investors

 

Disclosure regarding our mineral properties, including with respect to Mineral Reserve and Mineral Resource estimates, in this news release was prepared in accordance with NI 43-101. NI 43-101 is a rule developed by the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. NI 43-101 differs significantly from the disclosure requirements of the SEC generally applicable to United States companies. For example, the terms “mineral reserve”, “proven mineral reserve”, “probable mineral reserve”, “mineral resource”, “measured mineral resource”, “indicated mineral resource” and “inferred mineral resource” are defined in NI 43-101. These definitions differ from the definitions in the disclosure requirements promulgated by the SEC. Accordingly, information contained in this news release will not be comparable to similar information made public by United States companies reporting pursuant to SEC disclosure requirements.

- 11 -

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