TORONTO--(BUSINESS WIRE)-- TMAC Resources Inc. (TSX: TMR) (“TMAC” or the “Company”) reports its second quarter 2019 financial results. All amounts are in Canadian dollars unless otherwise indicated.
Jason Neal, President and Chief Executive Officer of TMAC, stated, “The royalty transaction announced this morning strengthens the balance sheet with gross proceeds of $57 million to enable ongoing investment in growth at Hope Bay while providing a buffer against operational volatility as well as the funding support for our seasonal sealift. This transaction was determined to be the most attractive cost of capital, preserve the best participation in strengthening gold prices for our shareholders and has the benefit of maintaining both financial and strategic flexibility. TMAC reported consecutive quarters of earnings with a second quarter net profit of $0.01 per share on revenue of $66.1 million with an average realized gold price of US$1,310 per ounce. As previously reported, quarterly production has modestly declined as a result of reduced plant recovery from 84% to 80%, which in turn has contributed to an increase in AISC(1) and Cash Costs(1) to US$1,081 per ounce and US$729 per ounce, and US$1,036 per ounce and US$693 per ounce for the quarter and year to date, respectively.”
Jason Neal continued, “We continue to have strong drilling results in the growing Doris BTD Extension zone, including in one hole 110.8 grams per tonne of gold over 10.8 metres. Additionally, initial drill results in a new zone we are calling Doris Valley, as part of our Doris regional program, are intriguing and we are evaluating our follow up strategy. At Doris Valley, assays from two holes in the vicinity of good surface grab samples included promising intercepts within the first 15 metres from surface. The first encountered 9.0 grams per tonne of gold over 8.5 metres including 15.4 grams per tonne of gold over 2.3 metres and a second had 5.3 grams per tonne of gold over 4.8 metres including 12.5 grams per tonne of gold over 1.6 metres. There is obviously more work required to follow up on this initial success, but this highlights the potential to grow our mineral inventory through even modest exploration investment.”
Jason Neal concluded, “In the second quarter the Board of Directors approved the addition of two key capital investments, including additional mining equipment to begin the portal and decline at Madrid North for advanced exploration, as it is important to advance the second potential mine at Hope Bay. Our capital project to improve gravity recovery is complete but highlighted the capacity constraint of the concentrate treatment plant, and the purchase and installation of the scavenger circuit was approved to address gold in solution losses. These items together with an increase in capital for the ocean discharge project, including a scope change to add water treatment, from approximately 90% of the increase in our expansion capital guidance from $20 million to $36 million. We are also narrowing our initial production guidance from 160,000 to 180,000 ounces to now be 170,000 ounces at the top end. Cash costs and AISC guidance has been updated to reflect the change in production guidance as well as a modestly strengthening Canadian dollar and additional royalties for the second half of the year. Cash cost guidance has been narrowed within the existing range, with the low end increasing from US$625 per ounce to US$650 per ounce. AISC guidance has increased by about 5% to now be US$950 per ounce to US$1,050 per ounce.”
SECOND QUARTER 2019 FINANCIAL HIGHLIGHTS
• Gold production and sales
38,520 ounces produced, 37,730 ounces sold
• Gross revenues
• Average realized gold price
$1,751 per ounce (US$1,310 per ounce)
• Cash Costs (1)
US$729 per ounce of gold sold
• Cost of sales (2)
US$1,105 per ounce of gold sold
• All-in Sustaining Costs (“AISC”)( 1)
US$1,081 per ounce of gold sold
• Adjusted EBITDA (1)
• Net profit
• Net profit per share
$0.01 per share on a basic and fully diluted basis
• Cash flows from operations
• Sustaining capex (1)
• Expansion capex (1)
• Cash on hand
$45.4 million at June 30, 2019, including:
$14.6 million of unrestricted cash
$30.8 million of restricted cash
• Principal repayments
? Debt balance
$147.7 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.
BALANCE SHEET AND CASH MANAGEMENT
On August 14, 2019, TMAC entered into an amending agreement (the “Royalty Amendment”) to the existing 1% net smelter royalty (“NSR”) with Maverix Metals Inc. (“Maverix”). The Royalty Amendment provides Maverix with an additional 1.5% NSR for proceeds of US$40 million. The key terms of the Royalty Amendment are:
• US$40 million proceeds for the Additional 1.5% NSR Royalty Amendment and US$3 million concurrent equity issuance to Maverix at a price of C$6.00 per share (US$43 million total proceeds)
• Short term incremental 0.25% NSR until the additional 1.5% NSR is registered against the property, which is expected to occur once the Sprott debt is repaid (expected in 2021)
• Full buyback right for the entire additional 1.5% NSR (and bonus 0.25% NSR) for US$50 million in the event of a change of control transaction that is announced before June 30, 2021
• Partial buyback right of 0.5% of the additional 1.5% NSR for US$15 million after June 30, 2021
• Step-down of the additional 1.5% NSR, regardless of whether the partial buyback right has been exercised, to 0.75% after three million ounces of gold have been produced at Hope Bay from the effective date.
• Ability for TMAC to pay the quarterly additional NSR amounts with common shares at then current share prices until June 30, 2021
• Effective date of August 1, 2019 for new NSR payments
• The transaction is expected to close on or around August 16, 2019
Please refer to TMAC’s news release that summarizes the Royalty Amendment, issued on August 14, 2019 titled “TMAC Enters into a Royalty Amendment with Maverix”.
TMAC renewed the diesel fuel purchase and storage agreement with a subsidiary of Macquarie Bank Ltd (“Macquarie”) whereby Macquarie purchases and delivers diesel fuel to Hope Bay and stores fuel in TMAC’s tanks at Roberts Bay. TMAC will purchase and pay for the diesel fuel as it is consumed. The price of the diesel fuel is fixed in Canadian dollars at the time of delivery to site at the same terms as TMAC’s existing fuel supply and delivery agreement, plus a premium. This agreement provides a mechanism that enables TMAC to better manage the levels of working capital and reduce the seasonal volatility of its operating cash outflows.
SECOND QUARTER 2019 PRODUCTION HIGHLIGHTS
• Production of 38,520 ounces of gold compared to 40,050 ounces of gold produced in the first quarter 2019.
• Underground mine production during the second quarter of 2019 was 1,160 tonnes per day at an average grade of 11.4 grams per tonne. Included are 91,600 tonnes of ore at an average grade of 12.7 grams per tonne, produced from longhole stoping and sill development during the quarter. Sill development contributed a further 14,200 tonnes at an average grade of 3.5 grams per tonne, 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 1,740 tonnes per day at an average grade of 9.5 grams per tonne and an average recovery of 80% in the second quarter 2019.
Please refer to TMAC’s news release that summarizes the second quarter 2019 operating results, issued on July 15, 2019 titled “TMAC Resources Announces Q2 2019 Production of 38,520 Ounces”.
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