TMAC Announces Q3-2019 Financial Results

TORONTO--()--TMAC Resources Inc. (TSX: TMR) (“TMAC” or the “Company”) reports its third quarter 2019 financial results. All amounts are in Canadian dollars unless otherwise indicated.

Jason Neal, President and Chief Executive Officer of TMAC, stated, “TMAC reported a third quarter net profit of $0.07 per share on revenue of $72.8 million with an average realized gold price of US$1,469 per ounce. EBITDA improved to $35.1 million from $26.2 million in the previous quarter and cash flow from operations before working capital changes improved to $30.1 million from $19.9 million. Quarter-end cash balance was $76.8 million, including $47.4 million unrestricted.”

Jason Neal continued, “Although plant recoveries in the third quarter increased from 80% to 82%, quarterly production did not improve as plant feed grade was lower. Quarter over quarter, Cash Costs(1) were unchanged at US$729 per ounce, and AISC(1) increased to US$1,155 per ounce from US$1,081 per ounce in the second quarter and is attributed to an increase in sustaining capital per ounce from US$254 to US$343 related largely to annual sealift capital items.”

Jason Neal continued, “While the Doris Mine is characterized almost uniformly by outstanding ground conditions, the Doris BTD East Limb is unique as it is in contact with the underside of the diabase dyke zone and we have had to undertake significant rehabilitation work after initial development to re-establish a safe working environment. The highest-grade portions of the BTD East Limb are at the end of the sequence and are now scheduled to be processed in the first quarter of 2020. In the release of our operating results on October 15, 2019, we spoke to the need to produce 45,000 ounces in the fourth quarter to meet full year guidance, and we outlined the key areas where we needed to deliver to meet our target. At the time of that release we believed this was within our capability. We are now however forecasting 25,000 to 35,000 ounces, significantly as a result of recent rescheduling of BTD East Limb production. We have evaluated resequencing the mining plan to access this material sooner, but it may result in losing ounces from the overall plan. As with the last stopes of the Doris Hinge zone, which was mined and processed earlier this year, the highest-grade areas at BTD East Limb also need to be blended for processing over a reasonable period and cannot be rushed through the Plant. I am very disappointed to not be able to meet initial annual production guidance, but not so much so that we are going to deviate from the prominence of safety in the mine or risk sterilizing any of the best ore in the Doris mine.”

Jason Neal concluded, “We are now scheduling release of our Preliminary Feasibility Study (“PFS”) concurrently with our updated year end Mineral Resource and Mineral Reserve statement. The PFS assumptions are an important input to the Mineral Resource and Mineral Reserve statement, and vice versa, so concurrent release is required. Therefore, please expect both disclosures in the first quarter of 2020. The purpose of the PFS is to define the potential for improved shareholder value through future expansion at Hope Bay. We have been evaluating two cases internally for increased processing rates in parallel to compare against the approach of our 2015 PFS plan: one focused on integrating an open pit with the underground plan; and the second seeking to maximize underground mine production through greater concurrent rather than sequential mine development. Our 2020 PFS will be based on the preferred scenario. Our main objective is to generate free cash flow and shareholder value through disciplined investment, risk assessment and operating flexibility, and does not displace our primary focus of continuing to improve current operating performance. We are creating options not commitments and look forward to presenting the results of our work.”

THIRD QUARTER 2019 FINANCIAL HIGHLIGHTS

  • Gold production and sales

36,290 ounces produced; 37,580 ounces sold

  • Gross revenues

$72.8 million

  • Average realized gold price

$1,938 per ounce (US$1,469 per ounce)

  • Cash Costs(1)

US$729 per ounce of gold sold

  • Cost of sales(2)

US$1,075 per ounce of gold sold

  • All-in Sustaining Costs (“AISC”)(1)

US$1,155 per ounce of gold sold

  • Adjusted EBITDA(1)

$38.0 million

  • Net profit

$8.4 million

  • Net profit per share

$0.07 per share on a basic and fully diluted basis

  • Cash flows from operations

$12.0 million

$30.1 million before working capital changes

 
  • Sustaining capex(1)

$17.1 million

  • Expansion capex(1)

$17.7 million

  • Cash on hand

$76.8 million at September 30, 2019, including:

$47.4 million of unrestricted cash

$29.4 million of restricted cash

 

 

  • Principal repayments

$nil

  • Debt principal balance

$154.9 million (US$117.0 million)

(1) Refer to the “Non- IFRS Measures” section in the associated MD&A for a description and calculation of these measures.
(2) Includes depreciation.

REVISED 2019 GUIDANCE

With the change to fourth quarter production expectations to 25,000 to 35,000 ounces, full year production guidance is now 140,000 to 150,000 ounces, down from 160,000 to 170,000 ounces previously. As a result, full year Cash Cost guidance is now US$725 to US$775 per ounce sold, up from US$650 to US$700 per ounce sold, and AISC guidance is now US$1,100 to US$1,175 per ounce sold, up from US$950 to US$1,050 per ounce sold. The reduction in production guidance required an adjustment to the Cash Cost and AISC guidance as the same expenditures are expected to be to be incurred with fewer ounces produced.

THIRD QUARTER 2019 PRODUCTION HIGHLIGHTS

  • Production of 36,290 ounces of gold in the third quarter and 114,860 ounces of gold year-to-date.
  • Underground mine production during the third quarter of 2019 was 1,450 tonnes per day at an average grade of 9.2 grams per tonne (“g/t”). Included are 121,700 tonnes of ore at an average grade of 9.7 g/t, produced from longhole stoping and sill development during the quarter. Sill development contributed a further 11,300 tonnes at an average grade of 3.6 g/t, which is below the mining cut-off grade of 4.0 grams per tonne and is classified as incremental ore.
  • The Plant achieved throughput of 1,710 tonnes per day at an average grade of 8.8 g/t and an average recovery of 82% in the third quarter 2019.

Please refer to TMAC’s news release that summarizes the third quarter 2019 operating results, issued on October 15, 2019 titled “TMAC Announces Q3-2019 Operating Results”.

UPDATE ON MINING

The mining rate for the third quarter was significantly higher at 1,450 tonnes per day, which does not include the benefit of surface mining from the Madrid North Naartok East crown pillar. An increase in underground development in the second half of 2019 related to the addition of a third jumbo crew and an increase in the number of development headings will maximize the amount of ore sources available during the fourth quarter of 2019 and throughout 2020. Mine development throughout 2019 has primarily focused on Doris BTD and Doris Connector. Doris Central will be accessed before the end of the year and is expected to become a significant source of ore in 2020.

Production ore from the Doris BTD East Limb, which was expected to be mined in the fourth quarter, will now be split between the fourth quarter of 2019 and the first quarter of 2020, with the highest-grade areas of the BTD East Limb now scheduled for the first quarter of 2020. The highest-grade section of the BTD East Limb ore is at the end of the mining sequence, similar to Doris Hinge mined in the first half of 2019. The BTD East Limb is located immediately beneath the diabase dyke and as the mining sequence progressed towards the dyke the ground stress environment changed, and the ground conditions deteriorated. The upper levels of this zone now require significant rehabilitation work within the initial sill development levels to ensure this is a safe working environment.

The Doris BTD Extension now has ore development sills on five levels and a sixth recently commenced. Initial ore production from longhole stopes is commencing in the fourth quarter of 2019. The Doris BTD zone is expected to be mined with a combination of longhole and drift and fill techniques and which is being defined through sill development in ore and definition drilling which is taking longer than expected due to the complexity of the vein system.

First ore production from the Madrid Naartok East crown pillar started in October 2019. Mining of the crown pillar is estimated to produce 91,875 tonnes of ore at a grade of 6.3 g/t in the first phase in 2019. Plant feed from the Doris mine has been supplemented with the available stockpile material during the first nine months of 2019 and will be supplemented further with material from the Naartok East crown pillar surface mining during the fourth quarter. Stockpiles at the Plant are at their lowest point at the end of the third quarter and are expected to be rebuilt during the fourth quarter which includes the contribution of the crown pillar material.

Mine development productivity improved to 23.2 metres per day during the third quarter of 2019 compared with 20.2 metres per day achieved during the second quarter and 18.4 metres per day achieved in the first quarter. Several productivity improvement programs have been initiated and further improvements to development rates are expected during the fourth quarter.

On October 24, 2019, TMAC announced that construction had started on the Madrid North underground portal. The portal and underground development is targeting the Naartok West zone, enabling access to first production stopes in late 2020. Breaking ground on the Madrid underground portal is an important milestone that will provide both near-term operational flexibility and enable medium-term potential growth alternatives at Hope Bay. The 2019 capital expenditure guidance was increased by $4.0 million in the second quarter of 2019 to purchase equipment delivered as part of the 2019 sealift and will increase by a further $6.0 million for the cost to commence construction of surface infrastructure and to commence the portal and ramp during the remainder of 2019. As a result, the 2019 expansion capital guidance is $42.0 million. Please refer to TMAC’s news release that summarizes the details of the Madrid North underground portal, issued on October 24, 2019 titled “TMAC Initiates Madrid North Underground Portal”.

UPDATE ON PLANT THROUGHPUT AND RECOVERIES

Installation and commissioning of the surge bins between the crushing and grinding circuits were completed during the third quarter. The Plant processed an average of 1,860 tonnes per day in August and September combined.

The availability of the gravity concentrators improved over the third quarter with utilization ranging from 79% to 94% in September for the individual concentrator units. Poor resin performance, especially in the second quarter, led to an increase in the solution tails due to the resin not being able to sufficiently adsorb all the gold from solution. The scavenger columns are being installed and commissioned during the fourth quarter to improve on current resin adsorption capacity.

EXPLORATION

A total of 12,830 metres of underground diamond drilling was completed during the third quarter of 2019 and included 7,750 metres on Doris BTD, 4,632 metres on Doris Connector, and 448 metres on the Doris North Zone. During the third quarter, 12,080 metres of surface diamond drilling were also completed, consisting of 1,292 metres targeting the Doris stratigraphy north of the Doris BTD zone and 10,788 metres on regional exploration targets in both the north and south portions of the Hope Bay belt. Surface diamond drilling will continue into the fourth quarter of 2019. Please refer to TMAC’s news release that summarizes the third quarter 2019 drill results, issued on October 15, 2019 titled TMAC Continues to Intersect High-Grade at Doris BTD Extension Zone.

THIRD QUARTER 2019 CONFERENCE CALL AND WEBCAST

Senior management will host a conference call and webcast to discuss these results on Friday,
November 1, 2019 at 10:00 a.m. (ET).

 

Conference call and webcast details:

 

Friday, November 1, 2019 at 10:00 a.m. ET

Webcast                                              www.tmacresources.com

Toll Free (North America)                    1-800-319-4610

Toronto                                                416-915-3239

International                                        604-638-5340

 

An archive of the webcast will be available on the Company’s website.

SUMMARY OF FINANCIAL RESULTS

 

 

Three months ended

Nine months ended

 

Units

September

30, 2019

September

30, 2018

September

30, 2019

September

30, 2018

P&L Summary:

 

 

 

 

 

Revenue

ounces

37,580

32,140

114,510

77,440

Revenue

$millions

72.8

50.3

206.8

126.6

Cost of sales(1)

$millions

53.5

50.0

159.5

127.9

Profit (loss) from mining operations

$millions

19.3

0.3

47.3

(1.3)

General and administrative

$millions

3.9

4.4

13.7

13.0

Net finance expense

$millions

4.9

5.3

14.3

15.0

Foreign exchange gain (loss)

$millions

(1.7)

3.5

4.8

(6.4)

Net profit (loss)

$millions

8.4

(3.3)

16.8

(28.6)

Per share

$/share

0.07

(0.04)

0.15

(0.31)

EBITDA(2)

$millions

35.1

15.7

93.2

17.1

Adjusted EBITDA(2)

$millions

38.0

11.2

90.9

22.0

 

 

 

 

 

 

Unit Costs:

 

 

 

 

 

Cost of sales(1)

$/oz

1,424

1,556

1,393

1,652

Cost of sales(3)

US$/oz

1,075

1,192

1,046

1,281

Cash Costs(3)

US$/oz

729

825

705

916

Sustaining capex

US$/oz

343

286

277

314

Other sustaining costs

US$/oz

82

106

93

134

AISC(2)(3)(4)

US$/oz

1,155

1,217

1,075

1,364

 

 

 

 

 

 

Cash Flow Summary:

 

 

 

 

 

Cash from operating activities
before working capital changes

$million

30.1

7.3

76.9

12.3

Cash from operating activities

$millions

12.0

6.1

68.9

31.6

Cash used in investing activities

$millions

(3.4)

(17.3)

(59.5)

(61.5)

Cash from financing activities

$millions

23.9

0.7

13.9

1.5

Net increase/(decrease) in cash

$millions

32.8

(10.6)

22.6

(28.4)

Cash at end of period

$millions

47.4

13.6

47.4

13.6

 

 

 

 

 

 

USD Results:

 

 

 

 

 

Average exchange rate

CAD/USD

1.32

1.31

1.33

1.29

Revenue

US$millions

55.2

38.6

155.7

98.1

Average realized sales price

US$/oz

1,469

1,201

1,360

1,267

Average spot price of gold –
London PM Fix

US$/oz

1,472

1,213

1,364

1,265

 

 

 

 

 

 

CAPEX Summary:

 

 

 

 

 

Sustaining(4)

$millions

17.1

22.0

42.2

55.5

Expansion(4)

$millions

17.7

5.9

34.9

12.2

Exploration and evaluation

$millions

8.1

4.4

17.1

10.5

(1) Includes depreciation.
(2) Refer to the definitions of EBITDA, Adjusted EBITDA, Cash Costs, AISC, sustaining capex and expansion capex in the “Non-IFRS Measures” section below.
(3) Translated using exchange rates at the time of incurring the expenditure.
(4) AISC is calculated using the updated guidance from the World Gold Council, issued in November 2018, and certain projects, previously classified as sustaining capital, have been reclassified as expansion capital.

 

SUMMARY OF OPERATING RESULTS

 

 

Three months ended

Nine months ended

 

 

Units

September

30, 2019

September

30, 2018

September

30, 2019

September

30, 2018

Mining:

 

 

 

 

 

Ore(1)

tonnes

121,700

92,300

345,000

243,800

Average grade

g/t

9.7

9.0

10.9

9.1

Contained gold

ounces

37,900

26,800

121,100

71,100

 

 

 

 

 

 

Incremental Ore(2)

tonnes

11,300

11,000

37,800

19,600

Average grade

g/t

3.6

3.1

3.4

3.0

Contained gold

ounces

1,300

1,100

4,100

1,900

 

 

 

 

 

 

Total ore

tonnes

133,000

103,300

382,800

263,400

Average grade

g/t

9.2

8.4

10.2

8.6

Contained gold

ounces

39,200

27,900

125,200

73,000

Mining rate

tpd

1,450

1,120

1,400

960

 

 

 

 

 

 

Waste

tonnes

181,900

72,100

369,100

216,400

 

 

 

 

 

 

Total tonnes

tonnes

314,900

175,400

751,900

479,900

Development

metres

2,140

1,810

5,640

4,850

 

 

 

 

 

 

Processing:

 

 

 

 

 

Processing rate

tpd

1,710

1,380

1,690

1,100

Ore processed

tonnes

157,600

127,400

460,900

299,300

Average grade

g/t

8.8

10.1

9.5

10.3

Contained gold

ounces

44,460

41,520

140,860

99,040

Recovery

%

82

80

82

78

Gold produced

ounces

36,290

33,100

114,860

76,890

Gold in process change

ounces

(1,320)

(360)

2,010

(1,410)

Gold poured

ounces

37,610

33,460

112,850

78,300

Gold sold

ounces

37,580

32,140

114,510

77,440

 

 

 

 

 

 

Stockpiles:

 

 

 

 

 

Primary stockpile:

 

 

 

 

 

Ore on surface(1)

tonnes

7,400

33,100

7,400

33,100

Average grade

g/t

5.9

7.0

5.9

7.0

Contained gold

ounces

1,400

7,500

1,400

7,500

 

 

 

 

 

 

Secondary stockpile:

 

 

 

 

 

Ore on surface(2)

tonnes

35,200

40,200

35,200

40,200

Average grade

g/t

3.4

3.3

3.4

3.3

Contained gold

ounces

3,900

4,300

3,900

4,300

(1) Includes material from mining that is above the mining cut-off grade of 4.0 g/t.
(2)Includes material from sill development that is below the mining cut-off grade of 4.0 g/t

ABOUT TMAC RESOURCES INC.

TMAC Resources operates Hope Bay located in Nunavut, Canada. The property and operations are remote but not isolated, serviced by both a port and airstrip. Hope Bay is an 80 km by 20 km Archean greenstone belt that has been explored by BHP, Miramar, Newmont and TMAC over a period spanning more than 30 years. In that time, more than $1.5 billion of sunk expenditures have been spent in exploration and evaluation, surface infrastructure, and mine and process plant development. TMAC began producing gold in early 2017 from Doris, its first mine at Hope Bay, and processed gold at the Doris Plant which originally had nameplate capacity of 1,000 tonnes per day and expanded to 2,000 tonnes per day midway through 2018. Hope Bay has 4.8 million ounces of Measured and Indicated Resources at Doris, Madrid and Boston deposits, largely within 350 metres of surface. There is potential to grow these established deposits considerably at depth, and then grow resources further through the prioritized exploration of the more than 90 other identified regional targets. TMAC is now permitted to produce from both Madrid and Boston.

FORWARD-LOOKING INFORMATION

This release contains “forward-looking information” within the meaning of applicable securities laws that is intended to be covered by the safe harbours created by those laws. “Forward-looking information” includes statements that use forward-looking terminology such as “may”, “will”, “expect”, “anticipate”, “believe”, “continue”, “potential” or the negative thereof or other variations or comparable terminology.

“Forward-looking information” is not a guarantee of future performance and management bases forward-looking statements on a number of estimates and assumptions at the date the statements are made. Furthermore, such “forward-looking information” involves a variety of known and unknown risks, uncertainties and other factors, which may cause the actual plans, intentions, activities, results, performance or achievements expressed or implied. See “Risk Factors” in the Company’s Annual Information Form dated March 11, 2019 filed on SEDAR at www.sedar.com for a discussion of these risks.

Contacts

TMAC Resources Inc.
Jason Neal
President and Chief Executive Officer
Phone: 416-628-0216

Lisa Wilkinson
Director, Investor Relations and Strategic Development
Phone: 416-628-0216
Lisa.Wilkinson@tmacresources.com
www.tmacresources.com

Contacts

TMAC Resources Inc.
Jason Neal
President and Chief Executive Officer
Phone: 416-628-0216

Lisa Wilkinson
Director, Investor Relations and Strategic Development
Phone: 416-628-0216
Lisa.Wilkinson@tmacresources.com
www.tmacresources.com