Pretium Resources Inc.
Q2 2019 Earnings Call Transcript

Published: 2 Aug 2019

[Operator:]

Thank you all for joining us this morning. Welcome to the Pretium Resources Second Quarter 2019 Conference Call. As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. The conference call today is being webcast live and available along with the presentation slides on Pretium's website at pretivm.com. I will now turn the call over to Mr. Joseph Ovsenek, Pretium's President and CEO. Please go ahead, sir.

[Joseph Ovsenek:]

Good morning, everyone. Welcome to our second quarter 2019 operating and financial results call. Participating on the call with me today is our CFO, Tom Yip. First and foremost, I want to acknowledge our hard-working and dedicated team. Another strong quarter of positive earnings is due to the efforts of everyone at Brucejack, in Smithers, and here in Vancouver.

[Tom Yip:]

Thank you, Joe, and good morning, everybody. Overall, our second quarter financial results were quite similar to our first quarter. We generated earnings from mine operations of over $29 million per quarter for a total of $59 million for the first half of 2019 and generated operating cash flows of $41 million per quarter for the total of $81 million for the first half of this year. Turing to Slide 10, during the quarter we sold at 85,953 ounces of gold at an average price of $1,252 per ounce for total revenues of $113 million compared to 81,434 ounces of gold at an average price of $1,257 per ounce for total revenues of in the first quarter of this year. Included our revenues were TCRCs related to our concentrate sales, which reduced our revenues by approximately $66 per ounce for the second quarter and $62 per ounce for the first quarter of this year. Factoring in the TCRCs, we realized $1,319 per ounce for both quarters. We processed 3,562 tonnes per day in the second quarter versus 3,279 tonnes per day in the first quarter. This resulted in costs per tonne yield of $173 in the second quarter versus $180 for the first quarter. The cost per tonne has declined in the second quarter as a result our fixed cost being spread over the additional tonnes being processed. The total cash cost per ounce sold averaged $702 for the second quarter versus $686 for the first quarter. The higher cost in the second quarter reflects higher mine development and resource drilling versus the first quarter.

[Joseph Ovsenek:]

Thanks, Tom. We’re using what we’ve learned over our first two years of production at Brucejack to optimize our mining habits. Turning to Slide 21, this is a planned view of the 1,170 meter level of the Valley of the Kings zone. The gray shaded areas represent our current underground development. The red discs represent drill intercepts of greater than 5 grams per ton gold and the yellow stars represent visible gold that has been identified underground.

[Operator:]

Thank you. We will now begin to question-and-answer session. . The first question comes from Justin Chan of Numis Securities. Please go ahead, sir.

[Justin Chan:]

My first question is just on unit costs, another really good quarter this quarter at $173 a tonne. That seems to be tracking below where you thought you'd be. I'm wondering, I guess, what update you could give on where you expect to be for the rest of the year and also next year? With more development and more drilling, where do think that gets to? Or is $173 or around $175 a good level?

[Tom Yip:]

Hi, Justin, thanks for the question. What I'll do is I'll point you to our AISC sheet, which is Slide 19, and basically what that shows you is that on the top-line our cash cost is approximately $255 million to $265 million for the year. We incurred $116 million of that already in the first half. Basically, that includes royalties and shipping costs. In the first half of the year, we’ve incurred about a $9 million to $10 million of that. So basically our production cost is going to be in the range of a $125 million to $135 million for the rest of the year which implies that it’s going to be slightly a little bit higher and that’s because we still have some maintenance that we scheduled, some camp in-road maintenance, liner maintenance and alike primarily in the third quarter. So I’ll just leave you with that as where we think we’re going to be for the rest of the year.

[Justin Chan:]

Okay, sure. It seems like you’re tracking low but I’ll take those numbers and say sorry for now. My second one is just on CapEx. If your sustaining budget is -- or if sustaining budget includes 15 million of non-recurring and your expansion budget was 24 million, am I correct in saying the other 9 million goes into non-sustaining CapEx? I'm just looking at Q2, it looks like the majority of the CapEx was sustaining. So I'm just wondering what your non-sustaining budget is for the full year and is 9 million that number?

[Tom Yip:]

Well the non-sustaining is primarily the expansion related expenditures and we’ve guided that to be above the 15 million but that’s going to be incurred over this year and a little bit in the first part of next year.

[Justin Chan:]

Okay, thanks. And then just my last one just in terms of mine plan and where you’re expecting mining from in the second half and getting up towards your guided grade for the full year. Is mining now moving primarily further West towards the Brucejack fault? Is that where you see more of your stuff is coming in the second half?

[Joseph Ovsenek:]

Good morning Justin. No we’re still mining essentially in that between that say 1,200 meter level and 1,410 meter level. We’ll pushing down and we’d like to get some -- work on these longitudinal tests stopes down on 1,170 level and then up on the 1,580 meter level. So it’s still within the same area of the mine through the quarter.

[Operator:]

Our next question comes from Joseph Reagor of ROTH Capital Partners. Please go ahead.

[Joseph Reagor:]

I guess the first thing is, is there any maintenance downtime planned for Q3 or Q4 that might impact tonnage at all?

[Joseph Ovsenek:]

Good morning, Joe. So we had a five day shutdown this quarter and we’ll have some more coming up in the next quarter. But that’s about it. There’s nothing other than ordinary changing sag, liners and things like that.

[Joseph Reagor:]

Okay. And then thinking about -- you guys have said second half of the year higher grades. Is it going to still be staging like Q3 is going to be better than Q2 and Q4 be better than Q3 or do you think the last three quarters will be kind of even? What should we think about with that?

[Joseph Ovsenek:]

No, I think you had that right on the first part there, Joe. So Q3 is expected to be higher than Q2 and Q4 is expected to be higher than Q3.

[Joseph Reagor:]

Okay. And then not to beat the cost question to death. But it appears as though your costs have been below expectations looking back multiple quarters? Should we take this as an indication that you guys are finding additional ways to cut costs? Or that aren't planned when you give guidance? Or is it more an indication that like just the mine is operating better than expected?

[Tom Yip:]

Well, Joe, I think some of that is also timing of when we’ll incur the expenses. I think we're tracking pretty well on what we had guided in our life in mine. Recall that when we put that together in the first five years with the extra resource, we were targeting about $178 per tonne on average. So we're tracking pretty close to those numbers right now.

[Operator:]

Our next question comes from Ovais Habib of Scotiabank. Please go ahead, sir.

[Ovais Habib:]

Hi, Joe. Hi, Tom. Just a couple of questions from me. So number one, in terms of grade for the second half, obviously, you guys are looking at grade moving higher in the second half and in terms of throughput as well. The question was just in terms of more kind of looking at Q3 and Q4, are we looking at a step of change or from Q2, or is this going to be a more of a Q4 situation where grade significantly improves?

[Joseph Ovsenek:]

You're going to see grade -- we’d expect to see grade improve through Q3 and then again in Q4. And look we're still holding to that target where we're about 10.4 grams per tonne of gold average for the year. So we don't expect to see Q2 and Q3 the same, Q3 will be a step up from Q2, and then forward step up again from there.

[Ovais Habib:]

And just going into -- obviously, you've done some test stoping as well for longitudinal mining. Joe, when is the next time we can expect to see some sort of an update on that or just in terms of decision wise?

[Joseph Ovsenek:]

We'll get our reserve updated -- reserve under work going in the fourth quarter. So we'll need to make a decision prior to going on that work. So by the time we have our Q3 call, we should be in a position to update you on what direction we're taking on the longitudinal stoping.

[Ovais Habib:]

And just my last question on your realized price for the quarter, I believe around the 1,250-ish level. Can you give us some color on in terms of the treatment in refining charges? And just how we should kind of model going forward as well? Or should we kind of stick with this kind of percentage?

[Tom Yip:]

Well, we've disclosed in our results that those treatment charges are roughly about $4 million to $5 million each quarter. So about $10 million for the first half and that's pretty consistent. And I would suggest using that for the rest of the year.

[Operator:]

Our next question comes from Anita Soni of CIBC. Please go ahead.

[Anita Soni:]

I'm just wondering in terms of the grade profile just as Ovais had asked about, how is the quarter going relative to your expectations for this quarter?

[Joseph Ovsenek:]

Good morning, Anita. We're tracking along where we expect to be. And so we'll continue. We're not giving guidance on a quarterly basis. But look, we're moving in that direction. And we expect Q3 grade to be higher than Q2 grade.

[Anita Soni:]

Okay. You do have a little bit of buffer though in terms of, I think, your tonnage rates are a little bit ahead of what you would've forecasted for the year, assuming you continue on. You've reached sort of the 3,500 tonne per day pretty quickly. So is there some variability or sort of buffer there in the grade? Or should we be sticking to that 10.4 and it's going to be potential for tonnage that’s higher?

[Joseph Ovsenek:]

Look, I stick with what we've guided on tonnage. We averaged 3,500 for the year. We will be continuing that ramp up. We're still targeting 3,800 tonnes a day by year-end. So we'll get you an update when we have our Q3 call on how that's going.

[Anita Soni:]

Okay. And then lastly on the total cash cost. You've guided to full year guidance of $255 million to $265 million, I think, that's reiterating your numbers. And I'm just wondering -- and given that you've only spent about $116 million to-date, so that implies sort of at least $115 million -- sorry, $150 million into the back half of the year. What's driving that increase in the costs?

[Tom Yip:]

Hi, Anita. It's primarily CapEx, you see that we're still targeting $30 million, but we've only spent just shy of $12 million in the first half. So that's probably a large part of it.

[Anita Soni:]

Okay. So I would say that that's probably about $5 million to $3 million, but -- or maybe $6 million, right? So that's, do you expect the unit costs to go higher in the second half of the year? Or are there other sites or additional site services costs that we're still not forecasting or baking into our numbers this year?

[Tom Yip:]

Well, yes, and there is some maintenance that has been scheduled in the third quarter, and we generally would expect rolls and cap maintenance and liners primarily to occur in that third quarter. So, we're expecting a little increase just for those maintenance items generally in the third quarter.

[Operator:]

Thank you. This concludes the question-and-answer session. I would now like to turn the conference back over to Mr. Ovsenek for any closing remarks.

[Joseph Ovsenek:]

Thank you, everyone for dialing into our earnings call this morning. We appreciate all comments and questions. Have a good weekend, everyone. Bye, bye.

[Operator:]

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.