TMAC Resources Inc. (TMR.TO) (“TMAC” or the “Company”) reports its operating and financial results for the fourth quarter and full year for 2018.
The Company achieved record gold production of 34,080 ounces during the fourth quarter. Gold sales of 31,380 ounces at an AISC(1) of US$1,112/oz during the fourth quarter produced record revenues of $51.4 million at cost of sales of $44.3 million, resulting in a profit from mining operations of $7.1 million. The net loss totalled $13.5 million, or $0.12 per share on a basic and fully diluted basis and Adjusted EBITDA (1) totalled $15.7 million. Increased production resulted in the generation of positive cash flows from operations of $11.9 million before working capital changes and a negative $10.0 million after working capital changes, the difference is largely driven by October sealift payments.
Jason Neal, President and Chief Executive Officer of TMAC, stated, “TMAC is pleased to report record performance in the fourth quarter and a very significant annual improvement from 2017. For the 2018 year we approximately tripled mine production, doubled Plant throughput and increased recoveries from 65% to 79% for the full year and 82% for the fourth quarter. The ramp up of the Plant and mine is not completed, but we are most of the way there now. TMAC ended the year with a substantially better developed Doris mine that contributes to further ramp up, significant Plant retrofits that enable our targeted recoveries of at least 90% and throughput of at least 2,000 tonnes per day, permitting that allows us to begin developing Madrid and Boston, and an operating team capable of executing on our growth plans. Importantly, we are exploring the Hope Bay Belt again with at least $20 million in expenditures to extend Doris, ready Madrid North for development, increase Boston reserves and resources and begin evaluating the most prospective and proximate to infrastructure of our more than 90 identified regional targets. By the end of 2019 we expect to publish a revised prefeasibility study for the development of Hope Bay which will incorporate the ongoing evaluation of the best risk-adjusted plan for generating stakeholder value.”
Mr. Neal continued, “Doris Hinge, Doris North BTD, Doris Crown Pillar as well as ongoing development ore from Doris Connector drove mine production of 2,310 tonnes per day in the fourth quarter, which fed higher Plant throughput of 1,800 tpd and rebuilt stockpiles. With the exception of the Doris Crown Pillar, these zones will continue to produce in 2019 and will be joined by the commencement of mining of the 283,000 tonne Naartok East Crown Pillar in the second half of 2019. It is important in our planning to both drive ramp up at the Doris mine while also having insurance for operational volatility, which is provided by stockpiles and the Naartok East crown pillar. We remain confident in our ultimate Plant recovery and throughput targets as we go through commissioning in the first quarter. Importantly, while behind our initial schedule, we have not taken a step backward during commissioning as shown by January demonstrating our 4th best month by production and 2nd best month by gold pour historically, though we are only starting to see the positive impacts on recovery as we near completion of the project with both surge bins installed within the next couple weeks.”
(1) Cash Costs, AISC (All-in Sustaining Costs), EBITDA (Earnings before interest, taxes, depreciation and amortization) and Adjusted EBITDA refer to non-IFRS measures. Refer to the Management Discussion and Analysis for further information on these measures.
Processing Plant: Fourth Quarter and January Performance
Building on the improvements achieved in the third quarter, the processing plant (“Plant”) processed 164,900 tonnes of ore with a grade of 7.8 grams per tonne (“g/t”), at an average rate of 1,800 tonnes per day (“tpd”) and achieved an average recovery of 82% during the three months ended December 31, 2018. In January 2019, 45,400 tonnes of ore with a grade of 9.9 g/t was processed at an average rate of 1,470 tpd at an average recovery of 82%. The Plant had six down days in January of which five days were related to unplanned maintenance that primarily related to the detox filter press, but were also compounded by a short period of extreme cold weather that was more severe than typical or previously experienced by TMAC. Excluding the unplanned maintenance period the January throughput rate would have been approximately 1,750 tonnes per day. The highest recovery achieved on a single day in December was 87% and the highest single day recovery in January was also 87%.
The total gold production for the year was 110,970 ounces. A total of 32,750 ounces were poured during the fourth quarter, bringing the total ounces poured for the year to 111,050 ounces. January production was 11,850 ounces with 12,520 ounces poured.
Processing Plant: Gravity Concentrator Upgrades and Additions
The design, procurement, and installation of the additional gravity concentrators to enhance the Plant’s capability to capture gravity recoverable gold and increase overall Plant recovery was completed during December 2018. Installation of the two planned surge bins, between the crushing and grinding circuits, commenced at the beginning of February and is expected to be completed by the first week of March. Commissioning is therefore expected to continue through the first quarter of 2019.
The improvement in recovery achieved in the fourth quarter was not resultant from new gravity concentrators as these were only installed during December. Project completion was several weeks behind the schedule set by management, primarily as a result of supplier delays in the fabrication and delivery of structural steel and construction materials to site.
While the installation phase has been well executed, certain aspects of commissioning of the equipment have been more challenging than expected. Several challenges with piping and pumping of concentrated material are being addressed, including higher than expected wear on newly installed piping and resizing required for several pumps and pump boxes. Piping wear has been improving and rubberized replacement joints are being installed to further reduce the wear rates. The water balance, which impacts recoveries of the concentrate treatment portion of the Plant (“CTP”), has also been impacted by the commissioning process which can be corrected once the surge bins are installed and the net changes in water balance are clearly demonstrated. The incremental increase in gravity recoveries experienced during January 2019 has essentially been offset by solution losses in the CTP. These solution losses are expected to decline once the full impact of the gravity concentrators is realized, and with net water balance being addressed once the surge bins are operating. TMAC is also working on incremental optimization projects to scavenge gold from the solutions being discharged from the resin circuit which would provide insurance against any volatility in CTP performance and incrementally improve recoveries. Plant recoveries have been maintained at recent levels during commissioning, however, it has not yet improved materially towards targets. Daily performance remains consistently in the 80-87% range. It is expected that Plant recoveries will average at least 90% consistently once commissioning is completed on the entire suite of newly installed equipment, that being the earliest sometime in the second quarter.
Doris Mine: Fourth Quarter and January Performance
Mine production was 212,400 tonnes of ore at a grade of 7.4 g/t, containing 50,600 ounces of gold during the three months ended December 31, 2018 from the underground mine, sill development and surface mining of the crown pillar, or a mining rate of 2,310 tonnes per day. The mine production for 2018 from all sources totalled 475,800 tonnes of ore at a grade of 8.1 g/t, containing 123,700 ounces of gold.
Underground mining produced 110,200 tonnes of ore at a grade of 8.9 g/t, containing 31,700 ounces of gold during the three months ended December 31, 2018, bringing the total for the year to 354,000 tonnes of ore at a grade of 9.0 g/t, containing 102,800 ounces of gold. The underground mining rate increased to 1,200 tonnes per day in the three months ended December 31, 2018, from the 1,000 tpd achieved in the previous quarter.
Sill development, which is separate from the underground mining above, produces material that is below the mining cut-off grade of 4.0 g/t (“Incremental Ore”). Sill development produced 12,000 tonnes of Incremental Ore at a grade 4.9 g/t containing 1,900 ounces of gold. The grade during the quarter was above the cut-off grade based on assay results received after stockpiling. Sill development for the year produced a total of 31,600 tonnes of Incremental Ore at a grade of 3.8 g/t, containing 3,900 ounces of gold. The production rate of Incremental Ore produced from sill development was 130 tpd in the fourth quarter, resulting in a total underground production rate of 1,330 tpd.
Production from surface mining the crown pillar at Doris produced 90,200 tonnes of ore at a grade of 5.9 g/t, containing 17,000 ounces of gold during the three months ended December 31, 2018. The production rate from surface mining was 980 tpd in the fourth quarter.
Madrid-Boston Project Permitting Progress
On January 14, 2019, the Minister of Intergovernmental and Northern Affairs and Internal Trade approved the two water licences as recommended by the Nunavut Water Board on December 7, 2018. This is the final approval for the two Type A Water Licences for the Madrid and Boston projects and concludes the final step in the environmental permitting process that enables mine construction at both projects. TMAC is now in possession of all Federal and Territorial approvals required for continued mining and gold production at Doris and for the development and mining of the Madrid North, Madrid South and Boston deposits.
Mineral Reserves and Resources – December 31, 2018
In a separate news release issued today, TMAC reported updated Mineral Resources and Mineral Reserves as at December 31, 2018. Refer to the news release titled “TMAC Reports Updated Mineral Reserves & Mineral Resources Estimate, Hope Bay, Nunavut” issued February 21, 2018 for complete details and a summary of changes since the June 30, 2017 Mineral Resources and Mineral Reserves statement
Operating cash costs have a large fixed cost component and an increase in recoveries and Plant throughput and mine production does not result in an equal increase in the total gross cost, instead, the result is a decrease in unit costs. Grade has a similar impact on profitability and it is expected that unit costs per ounce will decrease and profitability will increase, at least in the medium term as higher-grade areas are mined.
|US$ per ounce sold|| Dec 31 |
| Sep 30 |
| Jun 30 |
| Mar 31 |
| Dec 31 |
| Sep 30 |
| Jun 30 |
(1) AISC is calculated using the updated guidance from the WGC issued in November 2018 and certain of the projects previously classified as sustaining capital have been reclassified as expansion capital.
Cash Costs in the fourth quarter were US$752 per ounce sold which were 9% lower than the previous quarter due to higher recoveries and throughput, and as unit costs declined as economies of scale were achieved. Gold sales decreased by 2% in the quarter while gross Cash Costs, excluding the previous quarter’s net realizable value adjustment, decreased by 5% in the same period.
AISC in the fourth quarter was US$1,112 per ounce sold, which was 9% lower than the previous quarter. The sustaining capital expenditures incurred in the fourth quarter of 2018 were $10.3 million and were higher than expected due to a decision to increase underground development that resulted in an additional $2 million of expenditures.
The Company is heading into its first full year of production with both concentrating lines in production. The primary objective remains the achievement of efficient operations, including the completion of the ramp up of the Plant to 2,000 tpd throughput and 90% recoveries and mining the maximum ounces for processing.
|Production||Ounces||160,000 - 180,000|
|Cash Costs (1)(2)||US$/oz||625 – 700|
|AISC(1)||US$/oz||900 - 1,000|
|- Underground development||$millions||36|
|- Infrastructure and equipment||$millions||12|
|- Delineation drilling||$millions||6|
|Exploration and evaluation||$millions||25|
(1) Cash Costs and AISC (All-in Sustaining Costs refer to non-IFRS measures. Refer to the Management Discussion and Analysis for further information on these measures.
(2) Cash costs includes production cost, royalties and selling expenses.
Mining in 2019 will benefit from additional development in 2018 that increased the number of mining zones, including access to the hinge zone in Doris North which has been fully developed and is expected to provide high-grade ore in the first six months of 2019; Doris North BTD which will provide ore feed throughout the year; Doris Connector which in 2018 provided sill development ore will become an active mining area through 2019; and later in the year, Doris Central will be accessed and provide ore through sill development. The mining of the Doris North BTD extension will include drift and fill, and some of the mining of Doris Connector includes the transverse stoping method, with both methods expected to contribute to lower dilution. Also in 2019, TMAC will begin mining from surface the Naartok East crown pillar, which has a Probable Mineral Reserve of 283,000 tonnes at a grade of 4.8 g/t containing 43,900 ounces of gold from surface to 50 metres deep, where overburden and 175,000 tonnes of the Mineral Reserves is expected to be mined in 2019 and the balance in 2020. The established stockpiles and availability of ore from the Naartok East crown pillar provide additional flexibility in feeding the Plant in 2019 as insurance to the ramp up of underground mining at Doris.
Development in 2019 includes the addition of a third jumbo crew and an increase in the number of development headings to ensure sufficient ore sources are available during the latter half of 2019 and throughout 2020. Mine development throughout 2019 is primarily focused on Doris North BTD and Doris Connector, en-route to Doris Central. The development toward Doris Central had been stopped for an extended period early in 2017 resulting in significant stope production therefrom only becoming available in 2020, versus 2019 as outlined in the 2015 PFS. Doris Central, which contributes benefits of wider mining widths with less dilution and higher grades as compared to Doris Connector, will be first accessed in the latter half of 2019 for development ore. TMAC also has an opportunity to commence development of an underground portal at Madrid North that would produce ore from sill development approximately one year following the commencement thereof. The estimated cost of approximately $10 million to $15 million is not included in the 2019 guidance.
Plant feed in 2019 from the Doris mine is expected to be supplemented with stockpile material during the first half of the year and with material from Naartok East crown pillar surface mining in the second half of the year as required. The primary and secondary stockpiles as at December 31, 2018 are the equivalent of approximately 330 tpd of available feed over the course of the year, or approximately 570 tpd of available feed over the approximate seven months prior to ore production from the Naartok East crown pillar reaching the Plant.
Processing in 2019 will benefit from 2018 investment in expansion, retrofit and optimization. Management continues to be confident that the two concentrating lines, (“CL1” and “CL2”, respectively), can now process at a combined 2,000 tpd throughput capacity rate given that the Plant operated at more than 2,000 tpd for 37 of 92 days in the fourth quarter, including 13 days in excess of 2,200 tpd, for an average of approximately 1,800 tpd in the quarter. The highest throughput in a single day for the Plant was 2,335 tpd and the peak performance of the individual concentrator lines was 1,417 tpd and 1,432 tpd for CL1 and CL2 respectively. Plant throughput will be managed at levels to ensure maximum recoveries are achieved. Averaging 2,000 tpd on an ongoing basis will be achieved through increased consistency and operating stability, in part through the installation of surge bins currently in progress and the final commissioning of the completed circuit of the gravity concentrators.
Overall Plant recovery is a factor of: (i) the recovery achieved through gravity and flotation efforts in the concentrating lines and (ii) the recovery achieved in the CTP. The best recovery achieved from gravity and flotation since the beginning of December on a single day has been 94%. The best recovery achieved in the CTP since the beginning of December on a single day has been 96%. The objective is, with the completion of commissioning of the additional gravity concentrators and the stabilization of the Plant, including following the addition of surge bins, to achieve at least the level of each of these results consistently, that would result in approximately 90% overall recovery (i.e., the product of 94% multiplied by 96%). There is potential to optimize beyond 90% in the future and the Company has specific incremental optimization projects identified.
Sustaining capital in 2019 includes underground development at Doris, mining and surface equipment purchases, surface and process infrastructure work and delineation drilling to better define the Doris Mineral Reserves and Mineral Resources. Underground sustaining capital at Doris averaged approximately $6.7 million per quarter in 2018, while in 2019 it is budgeted at approximately $9 million per quarter as development metres are targeted to nearly double.
Expansion capital projects in 2019 include the completion of the ocean discharge line, completion of the installation of the surge bins and commissioning of the gravity concentrators, expanding the camp to support future operations at Madrid, the development work required to commence surface mining of the Naartok East crown pillar, the installation of additional diesel fuel storage capacity at Roberts Bay and other ancillary projects. The development capital to mine the Naartok East crown pillar will be financed through cash flows from Doris and additional restricted cash released through the Demand Bond structure. Should the cash flows from Doris operations not be sufficient, or if sufficient restricted cash is not released, then the capital and operating cash flows for the Naartok East crown pillar could be financed through other sources of financing.
Cash Costs of US$752 per ounce sold and AISC of US$1,112 per ounce sold in the fourth quarter are expected to decrease with continued improvement in recoveries expected in the first quarter of 2019, combined with improved throughput. Operating costs include a large fixed cost component and per ounce metrics benefit from increased gold production.
Exploration in 2019 includes a combined 60,000 metre drill program planned for the Hope Bay belt. TMAC has set targets to grow reserves and resources at Doris, especially at Doris North BTD near-term, supported by continued development of the Doris North BTD exploration ramp to the north, which will provide access to a further 100 metres of strike length in 2019. Drilling at Madrid North is targeted to advance these deposits towards development and production drilling, which includes a winter program at Suluk and a near-surface drilling program at Naartok East. TMAC will be re-initiating its Boston exploration program this summer and will follow with a defined winter program. TMAC also plans to conduct a regional exploration program that is focused on established targets which are in the proximity of existing and planned infrastructure.
As at December 31, 2018, TMAC has $52.5 million of cash, of which $24.8 million is unrestricted. The ramp up of the mine to ensure sufficient quantity and grade of ore is available for processing, and the ramp up of the Plant to its designed throughput of 2,000 tpd and achieving recoveries nearing 90% in the medium-term and are essential to ensure that the Company can generate sufficient cash to continue to fund its operations, fund its working capital requirements related to the sealift, fund its capital expenditures required for sustained operations and growth, fund exploration for increasing value to shareholders and fund debt repayments.
TMAC completed an equity financing in October 2018 that consisted of a concurrent public offering and private placement of common shares and flow-through common shares at a blended offering price of $4.40 per share. The aggregate gross proceeds were $90.0 million and the net proceeds were approximately $88.0 million. The use of proceeds was $57 million for debt repayment, $15 million for exploration programs to be carried out in 2019 and $16 million for capital expenditures that were mostly incurred in 2018.
In addition to the regularly scheduled debt principal payment of $8.6 million (US$6.5 million) in October 2018, the Company made an additional voluntary prepayment of $36.4 million (US$27.7 million) against its debt facility. The additional voluntary prepayment had no fees associated with it and reduced the January 31, 2019 principal payment to $11.6 million (US$8.8 million). The interest savings realized as a result of the voluntary prepayment were $0.8 million. The principal debt payments made during October 2018 and January 2019 totalled $56.6 million (US$43.0 million) in line with the use of proceeds from the October financing.
FOURTH QUARTER FINANCIAL AND OPERATING RESULTS
TMAC filed its fourth quarter 2018 Financial Statements and MD&A for the period ended December 31, 2018. The documents may be found on the Company’s website at www.tmacresources.com or, once filed, on SEDAR at www.sedar.com. Please read this news release in conjunction with these documents.
CONFERENCE CALL AND WEBCAST
Senior management will host a conference call on February 22, 2019 at 10 am (ET).
In order to participate in the conference call please dial + 1-416-915-3239 (Toronto local), +1-604-638-5340 for international toll or 1-800-319-4610for toll-free within Canada and the United States at least five minutes prior to the scheduled start of the call. Alternatively, a live audio webcast of the conference call will be available at http://services.choruscall.ca/links/tmacresources20181109.html. An archive of the webcast will be available on the Company’s website.
February 24 - 27, 2019
Jason Neal, President and Chief Executive Officer, will present on Wednesday, February 27, 2019 at the 2019 BMO Capital Markets Global Metals & Mining Conference, taking place in Hollywood, FL, USA.
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 “guidance”, “outlook”, “target”, “may”, “will”, “expect”, “estimates”, “plans”, “anticipate”, “envision”, “believe”, “continue”, “potential” or the negative thereof or other variations thereof or comparable terminology. Such forward-looking information includes, without limitation, bringing the timing for bringing Madrid and Boston into production and the throughput and recoveries ramp up at Doris throughout 2019.
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 of the Company to be materially different from any plans, intentions, activities, results, performance or achievements expressed or implied by such forward-looking information. See “Risk Factors” in the Company’s Annual Information Form filed on SEDAR at www.sedar.com for a discussion of these risks.