TMAC Nearing Commercial Production at Hope Bay
TMAC Resources Inc. (TSX:TMR) (“TMAC” or the “Company”) filed its Year-End Financial Statements, Management’s Discussion & Analysis and Annual Information Form for the year ended December 31, 2016, which documents can be found on the Company’s website at www.tmacresources.com or on SEDAR at www.sedar.com. The highlights provided below are derived from these documents and should be read in conjunction with them.
Dr. Catharine Farrow, Chief Executive Officer of TMAC, stated, “We are thrilled with our progress in bringing the Doris mine and mill complex into production. At year-end, our high-grade ore stockpile totalled 121,600 tonnes grading 14.5 grams per tonne gold and containing 56,500 ounces of gold. On the processing side, we poured our first gold February 9th and recently completed plant commissioning. The ore stockpile will be used to augment our mill throughput to 1,000 tonnes per day during 2017 as we ramp-up mining to 1,000 tpd and our planned expansion to 2,000 tonnes per day starting in early 2018. All of this has been achieved essentially on time and on budget.”
She added, “We are now focused on process optimization, on-site operator training and ramp up to steady state production in order to attain commercial production this quarter. TMAC’s schedule and budgetary successes on its Path to Production are the result of the tremendous work and dedication by our employees, Gekko, other contractors and consultants. We would also like to acknowledge the great support of the communities of the Kitikmeot Region and our Inuit landowners. We look forward to continuing to deliver on our vision to build the Hope Bay belt into a multi-generational mining camp.”
THE HOPE BAY PROJECT’S PATH TO PRODUCTION OVERVIEW
The Path to Production plan covered the 24-month period commencing January 1, 2015, ending December 31, 2016, and included the completion of construction, assembly and initial commissioning of the Processing Plant. The project is essentially on target with respect to the original timing as TMAC envisions achieving commercial production of gold during the first quarter of 2017. The Path to Production plan did not include the finalization of commissioning and ramp-up that is included in the capital expenditures detailed in the 2017 outlook.
With the $9 million of funds raised from the flow through Common Share financing in March 2016, the total estimated cash outflows, including working capital, for the combined 2015 and 2016 years increased from $325 million to $334 million. As at December 31, 2016, TMAC had incurred $350 million of expenditures, including $8 million of additional environmental bonding required under the Doris Water Licence, and had completed over 98% of the scope of work with approximately $2 million left to be incurred. The cash outflows to complete the Path to Production plan are, therefore, expected to be approximately 3% higher than the $308 million budget mainly due to additional expenditures incurred to complete all of the foundation work on the Mill Building, additional installation costs of Processing Plant at site and additional costs for vessels for the 2016 sealift, partially offset by cost reductions in other areas including mining. In addition, the letters of credit (the “Letters of Credit”) supporting environmental rehabilitation bonding are $34 million instead of $26 million. The increase in environmental bonding results from a number of factors essentially not within TMAC’s control.
Table 1: Path to Production plan’s cash outflows for the period from January 1, 2015 to December 31, 2016. | ||
Principal Purpose | Path to Production | Incurred to |
$ million | $ million | |
Hope Bay Project development costs | ||
Direct costs | 145 | 151 |
Indirect costs | 20 | 20 |
Capitalized pre-production operating costs | 54 | 57 |
Hope Bay Project development sub-total | 219 | 228 |
Corporate, exploration, permitting and general | ||
expenditures related to the Hope Bay Project | 89((1)) | 88 |
Path to Production development sub-total | 308 | 316 |
Collateral for Letters of Credit | 26 | 34 |
Total | 334(2) | 350 |
(1) Includes $9 million from the flow-through financing completed March 18, 2016. | ||
(2) Comprises $325 million of the Path to Production and $9 million from the flow-through financing. |
The ore stockpile on surface at December 31, 2016 totalled 121,600 tonnes with 56,500 ounces of contained gold (at 14.5 grams per tonne), compared with TMAC’s Path to Production plan that included having a gold ore stockpile of 110,700 tonnes containing 55,600 ounces of gold (at 15.2 grams per tonne). The stockpile is to provide the Processing Plant with significant feed at start-up, ensure a smooth production ramp-up to 1,000 tonnes per day (“tpd”) in 2017 and, following the delivery and installation of a second Gekko Systems Pty Ltd. fabricated Python (crushing, grinding and flotation concentrate producing circuit) to site in the 2017 sealift, to 2,000 tpd by the end of 2017.
At December 31, 2016, TMAC had $63 million of cash and cash equivalents excluding restricted cash of $45 million that is composed of a $10 million minimum cash balance in a segregated account in accordance with the Debt Facility requirements and $35 million invested in guaranteed investment certificates set aside as collateral for the Letters of Credit that support environmental rehabilitation bonding and provide security for compliance under various agreements with Inuit organizations. The proceeds from a bought deal financing of $60 million are being used for the exploration and development below the diabase dyke at Doris North; however, the timing for these expenditures could provide a working capital cushion during ramp up if needed.
2017 OUTLOOK
TMAC completed its first gold pour from its Doris mine on February 9, 2017. TMAC’s focus for 2017 remains the orderly, but relatively quick, ramp up of gold production by the Processing Plant, the ramp up of underground production at Doris from the approximately 1,000 tpd to 2,000 tpd that will be required to feed the current 1,000 tpd capacity Python and a second 1,000 tpd capacity Python planned for delivery in the 2017 sealift. The key production statistics and expected expenditures in 2017 are provided in Table 2 below.
Table 2: Summary of key production statistics and expected expenditures for 2017. | |
2017 Forecast | |
Ore mined (tonnes) | 275,000 |
Average grade mined (grams/tonne) | 13 |
Ore milled (tonnes) | 325,000 |
Gold sold (ounces) | 130,000 – 140,000 |
Cash cost per ounce sold (2) | <US$600 |
All-in sustaining cost per ounce sold (2) | <US$750 |
Capital expenditures: | |
Sustaining | $15 million |
Pre-production and expansion | $35 million |
Exploration and evaluation | $22 million |
1. CAD/USD exchange of 1.30. | |
2. Refer to non-IFRS measures below. | |
3. The PFS anticipated 136,000 ounces of gold recovered and sold. |
The pre-production and expansion capital for 2017 includes the costs associated with, completing the commissioning of the Processing Plant to commercial production, completing and installing the second Python including its related equipment and infrastructure, the construction of additional site bed-space for 80 people and the development of the Doris North BTD zone that is dependent on further exploration success but is anticipated to be a future source of ore to feed the expanding capacity of the Processing Plant. Pre-production and expansion capital in 2017 is forecast to be $35 million and includes a one-time charge of $8 million, payable to Nunavut Tunngavik Inc. in eight equal quarterly instalments, for achieving first gold production at Hope Bay.
Sustaining capital expenditures are estimated to be $15 million and include costs for construction activities in the tailings impoundment area, water discharge, surface equipment, an equipment wash-bay, final installation and commissioning of the last two generators at the power plant, and other miscellaneous items.
2017 OBJECTIVES
Hope Bay Project
- Achieve commercial production of gold during the first quarter of 2017 and ramp-up to full production.
- Deliver, in the 2017 sealift, install and commission the second Python in the Processing Plant.
- Safely and successfully deliver consumables, materials, supplies and additional mobile equipment in the 2017 sealift.
- Explore and develop the Doris North BTD zone for production by early 2018.
- Construct additional bed-space for 80 people at site.
- Commission the last two generators at the power plant.
- Conduct 6,500 metres of surface drilling at Madrid North (Naartok).
- Reopen the Boston camp and conduct 7,500 metres of exploration drilling.
- Support the technical review of the Madrid-Boston draft environmental impact statement and progress to submission of the final environmental impact statement and Type A Water Licence Application.
- Obtain the Madrid Type B Water Licence to allow TMAC to move forward with development of surface infrastructure, underground advanced exploration and bulk sampling.
Financial and Corporate
- Commence monthly repayments of the Debt Facility on July 31, 2017.
FINANCIAL AND OPERATING RESULTS
Statement of Profit or Loss
Net loss and comprehensive loss for the three months ended December 31, 2016 were $7.2 million, compared with a net loss and comprehensive loss of $3.2 million for the three months ended December 31, 2015.
CONFERENCE ATTENDANCE
TMAC will be attending the BMO Capital Markets 2017 Global Metals & Mining Conference in Hollywood, Florida, USA February 26, 2016 to March 1, 2017. The Company will be at Booth #2500 at the PDAC 2017 International Convention, Trade Show & Investors Exchange March 5 – 8, 2017, Toronto, Ontario, Canada.
ABOUT TMAC RESOURCES
TMAC holds a 100% interest in the Hope Bay Project located in Nunavut, Canada. TMAC is a fully financed, emerging gold producer, with the Doris Mine expected to achieve commercial production in the first quarter of 2017. The Company has a board of directors with depth of experience and market credibility and an exploration and development team with an extensive track record of developing high grade, profitable underground mines. TMAC’s shares trade on the Toronto Stock Exchange under the trading symbol TMR.
SCIENTIFIC AND TECHNICAL INFORMATION
Scientific and technical information related to Doris mine development was prepared by, and all other scientific and technical information contained in this document was reviewed and approved by David King, P.Geo., the Vice President, Exploration and Geoscience of TMAC, and Paul Christman, P.Eng., the Manager of Mining of TMAC, each of whom is a “qualified person” as defined by National Instrument 43-101 – Standards of Disclosure for Mineral Projects.
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 thereof or comparable terminology. Such forward-looking information includes, without limitation, bringing the Hope Bay Project into production and achieving commercial production in the first quarter of 2017.
Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management 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 future 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 dated February 23, 2017 filed on SEDAR at www.sedar.com for a discussion of these risks.
TMAC RESOURCES INC. | ||||
STATEMENT OF FINANCIAL POSITION | ||||
As at December 31, 2016 and 2015 | ||||
(Expressed in Canadian dollars) | ||||
| As at | As at
| ||
$millions | $millions | |||
Assets | ||||
Current assets | ||||
Cash and cash equivalents | 62.5 | 44.1 | ||
Amounts receivable | 7.3 | 4.0 | ||
Inventories | 77.7 | 26.5 | ||
Prepaid expenses | 0.8 | 2.1 | ||
Equipment held for sale | - | 0.5 | ||
148.3 | 77.2 | |||
Non-current assets | ||||
Property, plant and equipment | 801.4 | 649.4 | ||
Goodwill | 80.6 | 80.6 | ||
Restricted cash | 44.5 | 18.7 | ||
Other assets | 15.0 | 28.5 | ||
941.5 | 777.2 | |||
Total assets | 1,089.8 | 854.4 | ||
Liabilities | ||||
Current liabilities | ||||
Accounts payable and accrued liabilities | 26.8 | 12.8 | ||
Debt Facility | 46.1 | - | ||
Gold Call Options | 2.9 | - | ||
Other liabilities | 0.8 | - | ||
76.6 | 12.8 | |||
Non-current liabilities | ||||
Debt Facility | 115.3 | - | ||
Gold Call Options | - | 2.7 | ||
Provision for environmental rehabilitation | 24.9 | 24.7 | ||
Deferred tax liabilities | 67.9 | 71.4 | ||
208.1 | 98.8 | |||
Total liabilities | 284.7 | 111.6 | ||
Equity | ||||
Share capital | 830.2 | 755.9 | ||
Warrants | 1.2 | 2.9 | ||
Contributed surplus | 8.9 | 6.0 | ||
Accumulated deficit | (35.2) | (22.0) | ||
805.1 | 742.8 | |||
Total equity and liabilities | 1,089.8 | 854.4 | ||
TMAC RESOURCES INC. | ||||
STATEMENT OF PROFIT OR LOSS | ||||
For the years ended December 31, 2016 and 2015 | ||||
(Expressed in Canadian dollars) | ||||
Year ended | Year ended | |||
$millions | $millions | |||
General and administrative | ||||
Salaries and wages | 6.8 | 3.2 | ||
Share-based payments | 2.8 | 2.5 | ||
Professional and consulting fees | 0.5 | 1.1 | ||
Travel | 0.3 | 0.2 | ||
Investor relations | 0.5 | 0.1 | ||
Office, regulatory and general | 1.1 | 0.8 | ||
12.0 | 7.9 | |||
Write down of obsolete inventory | 2.3 | - | ||
Impairment of equipment and assets held for sale | 2.0 | 1.4 | ||
Loss on sale of equipment | - | 1.3 | ||
Loss before the following | 16.3 | 10.6 | ||
Finance income | (0.8) | (0.6) | ||
Finance expense | 0.7 | 2.0 | ||
Business development expenses | - | 0.9 | ||
Foreign exchange loss (gain) | 1.2 | (0.9) | ||
Fair value loss (gain) | 0.2 | (0.4) | ||
Other | (0.3) | 0.5 | ||
Loss before income taxes for the year | 17.3 | 12.1 | ||
Deferred income tax expense (recovery) | (4.1) | (2.5) | ||
Net loss and comprehensive loss for the year | 13.2 | 9.6 | ||
Net loss per share | ||||
Basic and diluted | $0.16 | $0.15 | ||
Weighted average number of shares (thousands) | ||||
Basic and diluted | 80,444 | 63,421 | ||
TMAC RESOURCES INC. | ||||
STATEMENT OF CASH FLOWS | ||||
For the years ended December 31, 2016 and 2015 | ||||
(Expressed in Canadian dollars) | ||||
Year ended | Year ended | |||
$millions | $millions | |||
Net loss for the year | (13.2) | (9.6) | ||
Operating activities | ||||
Adjusted for: | ||||
Share-based payments | 2.8 | 2.5 | ||
Finance income | (0.8) | (0.6) | ||
Finance expense | 0.7 | 2.0 | ||
Unrealized foreign exchange loss (gain) | 1.2 | 0.3 | ||
Fair value loss (gain) | 0.2 | (0.4) | ||
Impairment of equipment and assets held for sale | 2.0 | 1.4 | ||
Loss on equipment held for sale | - | 1.3 | ||
Write down of obsolete inventory | 2.3 | - | ||
Deferred income tax expense (recovery) | (4.1) | (2.5) | ||
Increase (decrease) in non-cash operating working capital: | ||||
Amounts receivable | (3.5) | (2.4) | ||
Inventories | (63.6) | - | ||
Prepaid expenses | - | 0.1 | ||
Accounts payable and accrued liabilities | - | 1.1 | ||
Operating cash flows before interest and tax | (76.0) | (6.8) | ||
Cash taxes paid | - | - | ||
Cash interest paid | (0.1) | (1.5) | ||
Cash flows from (used in) operating activities | (76.1) | (8.3) | ||
Investing activities | ||||
Additions to property, plant and equipment | (114.2) | (148.8) | ||
Interest received | 0.9 | 0.4 | ||
Restricted cash | (25.8) | (18.7) | ||
Cash flows from (used in) investing activities | (139.1) | (167.1) | ||
Financing activities | ||||
Third Equity Financing, net of issue costs | - | 40.3 | ||
Initial Public Offering | - | 146.9 | ||
Debt Facility drawdowns | 161.1 | (3.0) | ||
Proceeds on equipment held for sale | - | 2.7 | ||
Flow-through financing, net of issue costs | 8.9 | - | ||
Warrants exercised | 8.4 | - | ||
Bought Deal Financing, net of issue costs | 56.5 | - | ||
Cash flows from (used in) financing activities | 234.9 | 186.9 | ||
Effects of exchange rate changes on cash and cash equivalents | (1.3) | 0.6 | ||
Net increase in cash and cash equivalents for the year | 18.4 | 12.1 | ||
Cash and cash equivalents at the beginning of the year | 44.1 | 32.0 | ||
Cash and cash equivalents at the end of the year | 62.5 | 44.1 | ||
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Contact
TMAC Resources Inc.
Catharine Farrow, 416-628-0216
Chief Executive Officer
or
Ann Wilkinson, 416-628-0216
Vice President, Investor Relations
www.tmacresources.com
or
Renmark Financial Communications Inc.
Daniel Gordon, 416-644-2020 or 514-939-3989
dgordon@renmarkfinancial.com
www.renmarkfinancial.com