First Quarter Cash & Cash Equivalent Balance Grows to CA$147.3 Million

Unless otherwise stated, all amounts discussed herein are denominated in Canadian dollars. Please refer to the Foreign Exchange Assumptions at the end of this press release for US$ conversions.

Shares Issued: 201,530,687

THUNDER BAY, ON, May 10, 2017 /CNW/ - PREMIER GOLD MINES LIMITED (TSX:PG) ("Premier", "the Company") is pleased to announce its operational and financial results for the three months ended March 31, 2017. The Company previously released its gold production results for the first quarter of 50,979 ounces of gold (see news release dated January 12, 2017).  

2017 First Quarter Consolidated Highlights

• Production of 50,979 ounces of gold and 88,572 ounces of silver
• Gold sales of 51,593 ounces at an average realized price⁽ⁱ⁾ of CA$1,621 (US$1,224) per ounce
• Co-product cash costs⁽ⁱ⁾ of US$385 per ounce of gold
• Co-product all-in sustaining costs ("AISC")⁽ⁱ⁾ of US$432 per ounce of gold
• Revenue of CA$85.3 million (US$64.4 million)
• Operating income of CA$28.4 million (US$21.5 million)
• Net income of CA$6.7 million (US$5.1 million)
• Quarter end cash balance of CA$147.3 million (US$110.7 million)
• Cash flow from operating activities of CA$37.9 million (US$28.6 million) or CA$0.18/share (US$0.14/share)
• Free cash flow of CA$27.6 million (US$20.7 million) or CA$0.13/share (US$0.10/share), after investing CA$9.2 million (US$ 7.0 million) in exploration and pre-development programs.

 

Consolidated Financial Highlights – For the three months ended March 31, 2017

Strong operating results for the quarter contributed to an EBITDA of CA$44.6 million (US$33.7 million) and net income of CA$6.7 million (US$5.1 million) or CA$0.033/share (US$0.025/share).  Production costs at Mercedes were under budget as a result of cost-cutting initiatives implemented at the mine. The Company remains on track to meet production guidance of 125,000-135,000 ounces of gold in 2017.

These positive results contributed to the Company's strong financial position with a CA$27.6 million (US$20.7 million) increase in cash and equivalents to CA$147.3 million (US$110.7 million) and precious metals inventories of 22,772 ounces of gold and 55,230 ounces of silver as at March 31, 2017.

Capital expenditures during the quarter were CA$6.0 million (US$4.5 million) and exploration, evaluation and pre-development costs were CA$9.2 million (US$7.0 million).  Debt principal and interest paid during the quarter was CA$4.4 million (US$3.3 million).

 

Operational Highlights – For the three months ended March 31, 2017

Mercedes

Performance at the Mercedes Mine exceeded budget for the quarter with the mine management team focused on all opportunities to reduce costs and improve operating efficiencies.  Mercedes produced 22,164 ounces of gold and 88,572 ounces of silver in the first quarter and generated net cash from operating activities of CA$22.2 million (US$16.8 million).

Cash costs, on a co-product basis, were US$675 per ounce of gold (FY guidance US$680-710/oz) and AISC, on a co-product basis, were US$785 per ounce of gold (FY guidance US$810-840/oz).   

Key operational adjustments that resulted in lower operating costs included a change in the primary mining method to modified overhand cut and fill (from longhole) and replacing part of the mining fleet with compact mining equipment designed specifically for narrow mine workings. These changes reduced mining dilution and increased operating efficiencies.  

Other initiatives included; (1) waste reduction and recycling initiatives; (2) reduced reliance on contractor services; and (3) increased on-site maintenance capacity. These changes resulted in reduced materials consumption, improved ground support and paste backfill techniques and delivery methods, and increased equipment availability.  

When combined with the development of additional mine workings, including access to the Diluvio deposit in mid-March, all of the above initiative resulted in a sustained increase in mill throughput during the quarter with daily processing rates now regularly exceeding 2,000 tonnes per day.

 

Capital expenditures during the quarter totaled CA$4.9 million (US$3.7 million), including CA$1.5 million (US$1.1 million) in underground sustaining development, CA$0.9 million (US$0.7 million) in equipment and building infrastructure, CA$1.8 million (US$1.4 million) in underground expansion development and CA$0.7 million (US$0.5 million) in exploration.  

Exploration and development drilling ramped up steadily during the quarter with nine operating drill rigs now active at site including four underground rigs. The 2017 drilling program has been increased to approximately 50,000 metres for the year and will focus on several new vein zones that have been identified proximal to existing mine workings. A more fulsome exploration and drilling update will be provided in the near future.

South Arturo

Premier owns a 40% interest in the South Arturo Mine, which is 60% owned and operated by joint venture partner Barrick Gold.  The mine was brought into production in Q3-2016 and continues to operate at industry-low production costs.

First quarter production, attributable to Premier, was 28,815 ounces of gold.  A substantial stockpile remains to be processed and mining will continue through the balance of the second quarter. The mine is on track to meet the upper end of the 2017 full-year production guidance.

 

There were no material capital expenditures at South Arturo during the first quarter.

The joint venture continues to advance and consider additional development opportunities including a potential second open pit (Phases 1&3) and the El Nino underground deposit. 

Earlier in 2016, Barrick submitted permit applications for the development of the El Nino Mine utilizing a ramp from the bottom of the current open pit.  Drilling at El Nino is expected be completed in 2017 for initial mine planning.

McCoy-Cove

During the first quarter, the Company released a new mineral resource estimate (see Table 1) for the McCoy-Cove property and completed 9,321 feet of additional drilling (2,841 metres). 

Table 1 – 2017 Mineral Resource Estimate, McCoy-Cove Property

 

The company is working towards completing a Preliminary Economic Assessment ("PEA") in H2-2017.  The Cove-Helen Underground Exploration Plan of Operations (PoO) was approved in 2013 granting Premier the option of pursuing an underground exploratory drill program as well as test mining in the Helen Zone. Premier has initiated preliminary engineering, dewatering and baseline studies required to advance the underground exploration PoO towards development. Optimization and validation of the dewatering scenario is ongoing including a pump test to confirm dewatering rates.  A full metallurgical test program is ongoing and will be completed prior to initiating the PEA.

Hasaga

During the first quarter, the Company released a new resource estimate for the 100%-owned Hasaga property following 48,197 metres of drilling being completed in 2016.  An initial mineral resource estimate (see Table 2 below) was released in January of 2017. 

Table 2 – Mineral Resource Estimate, Hasaga Property

 

Drilling in 2017 will be focused of testing underground targets in Red Lake.

CEO Commentary

Ewan Downie, President and CEO stated, "We are very pleased with the strong results from both operations providing a solid balance sheet that provides Premier with the financial flexibility to carry out its future growth plans. Our low-cost production profile and growing reserves are expected to continue to generate strong cash flow well into the future."

2017 Guidance

The Company reiterates its 2017 production guidance of between 125,000 and 135,000 ounces of gold and between 325,000 to 350,000 ounces of silver.

Production estimates for 2017 are derived from life of mine operating plans prepared on the basis of mineral reserves associated with each property. Assumptions underlying 2017 gold production estimates for South Arturo and Mercedes are presented in the tables below.

 

Conference Call

The Company will host a conference call and webcast, May 11, 2017 at 10:00 am EDT.

Toll Free (North America):  1-888-231-8191
International:  1-647-427-7450
Conference ID:  18889357
Webcast URL: https://event.on24.com/wcc/r/1422375/03833F969F294F9A09E50A91D1990181  

The webcast replay will be available 1:00pm EDT on May 11, 2017 until 11:59 pm EST on May 18, 2017.

Conference Call Replay

Toll Free Replay Call (North America):  1-855-859-2056
International Replay Call:  1-416-849-0833
Passcode: 18889357
The conference call replay will be available from 1:00pm EDT on May 11, 2017 until 11:59 pm EST on May 18, 2017.

Stephen McGibbon, P. Geo., is the Qualified Person for the information contained in this press release and is a Qualified Person within the meaning of National Instrument 43-101.  Assay results from Hasaga are from core samples sent to either Accurassay Laboratories or Activation Labs, both accredited mineral analysis laboratories in Thunder Bay, Ontario, for preparation and analysis utilizing both fire assay and screen metallic methods. Drill samples from McCoy-Cove were sent to ALS Laboratories in Reno, Nevada for analysis with the analytical facility utilizing 30 gram fire assay with an AA finish for RC samples and 30 gram fire assay with AA finish and ICP-MS 30 element scan from 4-acid digestion for core samples. Over-limit samples receive an automatic gravimetric finish.

Premier Gold Mines Limited is a gold producer and respected exploration and development company with a high-quality pipeline of precious metal projects in proven, accessible and safe mining jurisdictions in Canada, the United States, and Mexico.

Foreign Exchange Assumptions

The Company's formal reporting currency is CA$ however for convenience to the reader of this press release, US$ are also quoted.  Exchange rates used in this press release are sourced from The Bank of Canada, http://www.bankofcanada.ca/rates/exchange/.  The balance sheet closing rate at March 31, 2017 was $1.33100 and the income statement year to date weighted average closing rate at March 31, 2017 used was $1.32377.

Non-IFRS Measures

The Corporation has included certain terms or performance measures commonly used in the mining industry that are not defined under International Financial Reporting Standards ("IFRS") in this document. These include: cash cost per ounce sold, all in sustaining cost ("AISC") per ounce sold and average realized price per ounce. Non-IFRS measures do not have any standardized meaning prescribed under IFRS, and therefore, they may not be comparable to similar measures employed by other companies. The data presented is intended to provide additional information and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS and should be read in conjunction with the Corporation's consolidated financial statements.  Readers should refer to the Corporation's Management Discussion and Analysis under the heading "Non-IFRS Measures" for a more detailed discussion of how such measures and are calculated.

This Press Release contains certain information that may constitute "forward-looking information" under applicable Canadian securities legislation. Forward-looking information includes, but is not limited to, statements about production and exploration potential and the Mercedes mine, South Arturo, McCoy-Cove and Hasaga, strategic plans, including future operations, future work programs, capital expenditures, discovery and production of minerals, price of gold and currency exchange rates, timing of geological reports, preliminary economic assessment and corporate and technical objectives. Forward-looking information is necessarily based upon a number of assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking information, including the risks inherent to the mining industry, adverse economic and market developments and the risks identified in Premier's annual information form under the heading "Risk Factors". There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information.  Accordingly, readers should not place undue reliance on forward-looking information.  All forward-looking information contained in this press release is given as of the date hereof and is based upon the opinions and estimates of management and information available to management as at the date hereof.  Premier disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.

SOURCE Premier Gold Mines Limited