Torex Gold Resources Inc. (the “Company” or “Torex”) (TSX: TXG)
reports the Company’s financial and operating results for the three
months ended March 31, 2020.
Fred Stanford, President & CEO of Torex,
stated:
“Operationally this was a solid quarter, with
108,537 gold ounces produced. The production performance was
complemented by the continued outstanding safety performance. As of
the end of March, the team had worked over 5.5 million hours
without a lost time injury. Since then, the lost time injury free
record has been extended to over 6 million hours and more than one
year worked. This commitment to safe work practices has been
expanded to healthy work practices as well. To date, we have had no
known or suspected cases of COVID-19 at our operation.
“Cost control was successful, with oxygen
addition to the leach circuit resulting in a 25% reduction in
cyanide consumption since the start of the program. Accounting
changes in the treatment of stockpiled ore, and a wild swing in the
value of the Mexican peso, created more challenges. For the quarter
the accounting changes to stockpiled ore resulted in an increase of
approximately $100 per ounce to TCC and AISC. This impact will
decline over the coming quarters and is expected to average out at
the impact expected in the original annual guidance numbers. The US
monetary stimulus in reaction to COVID-19 resulted in the
depreciation in many emerging market currencies, including
Mexico’s. This has us offside with our currency hedges and when
‘marked to market’, the significant lost opportunity to benefit
from the depreciated peso, affected earnings. There were also
benefits realized due to the rapid deterioration in the value of
the peso. All said and done, the business was solid for the
quarter, the financials are a bit messy.
“At the end of the quarter we started a
significant planned maintenance shutdown. The decree to suspend
non-essential businesses in Mexico was enacted during this
shutdown, and we did not restart when the maintenance was
completed. Extensive infection control has been effective,
and the care and maintenance team has remained free from COVID-19
infection. It is too early to be certain, but we anticipate a
lifting of the suspension decree in our area by May 18th. In
preparation for that event, we are warming up the processing plant
with feed from stockpiles to test the effectiveness and durability
of the repairs that were completed during the maintenance shutdown.
This will highlight whether additional repairs are required, and
they can then be completed before the decree is lifted.
“This should be the last long quote from me in a
press release…our succession plan is for Jody Kuzenko to take over
as CEO at the annual shareholder meeting and for me to transition
to the Executive Chair role. With Jody at the helm,
well-established management, technical, and social systems firmly
in place, and given the underlying talent of those throughout the
entire organization, I am extremely confident in the future
direction and success of the Company.”
This release should be read in conjunction with
the Company’s March 31, 2020 Financial Statements and MD&A on
the Company’s website or on SEDAR. A summary of Torex’s operating
and financial results can be found in Table 1.
First Quarter 2020
Highlights
- Gold production: Produced 108,537 ounces of
gold.
- Plant throughput and availability: Plant
throughput averaged 12,464 tpd. Plant availability increased
to 90%.
- Gold sold: 108,064 ounces at an average
realized gold price of $1,571/oz.
- Total cash costs1 and All-in sustaining
costs1: Total cash cost of $794/oz and all-in sustaining
cost of $975/oz.• The change in estimate for accounting for
stockpiles resulted in $10.8 million of inventory transferred to
operating costs, which contributed approximately $100/oz to total
cash costs and all-in sustaining costs during the quarter.
- Net loss: Reported loss of $47.0 million, or
$0.55 per share on a basic basis and a loss of $0.57 per share on a
diluted basis.• Net loss was negatively impacted by the 24.8%
depreciation in the Mexican peso relative to the US dollar during
the quarter.
- Adjusted net earnings1: Adjusted net earnings
of $19.9 million, or $0.23 per share on a basic and diluted
basis.
- EBITDA1 and Adjusted EBITDA1: Generated EBITDA
of $39.4 million and adjusted EBITDA of $67.4 million.
- Cash flow from operations: Cash flow from
operations totalled $29.5 million ($21.8 million prior to changes
in non-cash working capital).• The Company paid $47.2 million in
taxes during the quarter, primarily related to the March payment
regarding taxes accrued in 2019.
- Free cash flow1: Generated $2.1 million in
free cash flow ($14.9 million prior to non-sustaining capital
expenditures).
- Debt payments: Repaid $21.8 million of
outstanding debt during the quarter.
- Lost time injury frequency: Exited the quarter
with a LTIF of 0.31 per million hours worked. We now have worked
over 6 million hours without a lost time injury, with our last
reported LTI on April 22, 2019.
COVID-19 Update
While the complete suspension of operations at
ELG was a post quarter event, much time during the quarter was
spent designing and executing COVID-19 scenario plans. The purpose
of the various plans was two-fold:
- To look after the health of our employees, contractors and
community members during the global health pandemic.
- To maintain production for as long as possible and,
subsequently, to resume production as early as possible.
As the spread of COVID-19 increased overseas, we
undertook several initiatives to protect the health of our
employees, contractors, and local community members. These
initiatives included:
- Educational campaigns at site, and in the local communities,
about the virus, methods by which the virus can be transmitted, and
the need for good hygiene.
- Made a significant donation of hand sanitizer and protective
masks to the local communities.
- Enacted various control measures at site including social
distancing, meetings held in outdoor spaces, additional sinks for
hand washing, increased cleaning of vehicles, rooms, and common
areas, and a symptom reporting system.
- Proactive measures were taken to shore up the supply chain,
given some of our critical consumables are sourced from affected
regions.
As the global impact of the virus intensified,
our actions evolved as we implemented enhanced protocols at site
with the purpose of maintaining full production with the fewest
people at site. These enhanced measures included:
- International travel for all employees was suspended and
international travelers were restricted from site.
- The majority of employees providing service and support roles
transitioned to working remotely.
- High-risk employees were identified and commenced working from
home.
- Created laydown areas for contractors delivering supplies to
site without having to directly interact with employees.
- Three-tiered health screening was implemented for all employees
and contractors arriving at site.
- Suspended exploration drilling at both ELG and Media Luna as
well as on-site testing of Muckahi.
In April, we placed our assets on care and
maintenance in accordance with the Decree issued by the Mexican
Federal Health Ministry on March 31st. The majority of employees
went home to isolate. In addition to the care and maintenance
crews, we retained a healthy security force to safeguard the
assets. We also chose to maintain a contingent of community
relations employees based in the local communities to continue with
education and information campaigns. During the suspension of
operations, we have continued to pay all employees their wages,
paid out the annual bonus, and are staying current with tax
payments and accounts payable.
Uncertainty remains around the timing of a
re-start of full operations but with the possibility for the decree
to be lifted on May 18th for communities with low infection rate,
we are preparing for that possibility. Site activities will
ramp-up in step with the ability to maintain contagion prevention
protocols. The initial step is processing of ore from stockpiles.
Mining will restart later. How much later, depends upon a
number of factors, including working together with local
communities to understand and mitigate net risk.
Guidance Update
The Company is not able to re-establish full
year guidance at this time given the uncertainties related to
COVID-19. Torex withdrew full year guidance on April 2nd given
there was no clear line of sight as to when, how often, and how
long this pandemic could affect the Company’s ability to produce
gold at El Limon Guajes. The visibility on production and costs is
still unclear, and as such, Torex is not in a position to
re-establish guidance.
Enhanced Balance Sheet
Liquidity
In late April, Torex drew $50 million on its
revolving loan facility in order to provide additional cash
liquidity during the suspension of operations. The Company ended
April with $134.8 million in cash and has now drawn $100 million on
the $150 million facility.
Conference Call and Webcast
Details
The Company will host a conference call today at
9:00 AM (ET) where senior management will discuss the first quarter
operating and financial results. Please call the below numbers
approximately 10 minutes prior to the start of the call:
- Toronto local or international: 1-416-915-3239
- Toll-Free (North America): 1-800-319-4610
- Toll-Free (France): 0800-900-351
- Toll-Free (Switzerland): 0800-802-457
- Toll-Free (United Kingdom): 0808-101-2791
A live audio webcast of the conference call will
be available on the Company’s website at www.torexgold.com. The
webcast will be archived on the Company’s website.
1 Refer to “Non-IFRS Financial Performance
Measures” in the Company’s March 31, 2020 MD&A for further
information and a detailed reconciliation.
About Torex Gold Resources
Inc.Torex is an intermediate gold producer based in
Canada, engaged in the exploration, development and operation of
its 100% owned Morelos Gold Property, an area of 29,000 hectares in
the highly prospective Guerrero Gold Belt located 180 kilometers
southwest of Mexico City. The Company’s principal assets are the El
Limón Guajes mining complex (“ELG” or the “ELG Mine Complex”),
comprised of the El Limón, Guajes and El Limón Sur open pits, the
El Limón Guajes underground mine including zones referred to as
Sub-Sill and El Limón Deep (“ELD”), and the processing plant and
related infrastructure, which is in the commercial production stage
as of April 1, 2016, and the Media Luna deposit, which is an early
stage development project, and for which the Company issued an
updated preliminary economic assessment in September 2018 (the
“Technical Report”). The property remains 75% unexplored.
For further information, please contact:
TOREX GOLD RESOURCES INC. |
|
Fred Stanford President and CEO Direct: (647) 260-1502 Email:
fred.stanford@torexgold.com |
Dan Rollins Vice President, Corporate Development & Investor
Relations Direct: (647) 260-1503 Email:
dan.rollins@torexgold.com |
CAUTIONARY NOTES
Forward-Looking StatementsThis
news release contains “forward-looking statements” and
“forward-looking information” within the meaning of applicable
Canadian securities legislation. Forward-looking information
includes, but is not limited to, information with respect to the
future exploration, development and exploitation plans concerning
the Morelos Gold Property; the adequacy of the Company’s financial
resources, particularly in light of the COVID-19 pandemic; the
impact of the accounting changes to stockpiled ore declining over
the coming quarters and averaging out at the impact expected in the
original annual guidance numbers; management’s expectation that the
suspension decree in our area will be lifted by May 18th and the
timing for restart of operations at the ELG Mining Complex;
statements with respect to the succession plan of the Company and
the Company’s business plans and strategy; the timing and ability
of the Company being able to re-establish guidance, and other
events or conditions that may occur in the future. Generally,
forward-looking information can be identified by the use of
forward-looking terminology such as “plans,” “expects,” or “does
not expect,” “is expected,” “budget,” “scheduled,” “goal,”
“estimates,” “forecasts,” “intends,” “anticipates,” or “does not
anticipate,” “believes” or “potential” or variations of such words
and phrases or statements that certain actions, events or results
“may,” “could,” “would,” “might,” or “will be taken,” “occur,” or
“be achieved.”
Forward-looking information is subject to known
and unknown risks, uncertainties and other factors that may cause
the actual results, level of activity, performance or achievements
of the Company to be materially different from those expressed or
implied by such forward-looking information, including risks
associated with the COVID-19 pandemic; risks associated with the
adequacy of the Company’s liquidity position; predictability of the
grade; ability to achieve design gold recovery levels; fluctuation
in gold and other metal prices; commodity price risk; currency
exchange rate fluctuations; capital and operational cost
estimates; satisfying financial covenants under the Debt Facility;
illegal blockades; dependence on good relationships with employees
and contractors and labour unions; dependence on key executives and
employees; limited operating history; generating positive cash
flow; the ability of the Company to secure additional financing if
required; the safety and security of the Company properties;
servicing of the indebtedness of the Company; the ability to secure
necessary permits and licenses, title to the land on which the
Company operates, including surface and access rights; foreign
operations and political and country risk; the uncertainty of
diversifying the Company’s single asset risk; government policies
and practices in respect of the administration of recovery of VAT
funds and recovery of VAT funds; exploration, development,
exploitation and the mining industry generally; environmental risks
and hazards; decommissioning and reclamation costs; parameters and
assumptions underlying mineral resource and mineral reserve
estimates and financial analyses being incorrect; actual results of
current exploration, development and exploitation activities not
being consistent with expectation; risks associated with skarn
deposits; potential litigation; hiring the required personnel and
maintaining personnel relations; future commodity prices;
infrastructure; single property focus; use and reliance of experts
outside Canada; competition; hedging contracts; interest rate risk;
price and volatility of public stock; conflicts of interest of
certain personnel; credit and liquidity risk; compliance with
anti-corruption laws; enforcement of legal rights; accounting
policies and internal controls as well as those risk factors
included herein and elsewhere in the Company’s public
disclosure.
Forward-looking information is based on the
reasonable assumptions, estimates, analysis and opinions of
management made in light of its experience and its perception of
trends, current conditions and expected developments, as well as
other factors that management believes to be relevant and
reasonable in the circumstances at the date that such statements
are made, but which may prove to be incorrect. Although the Company
believes that the assumptions and expectations reflected in such
forward-looking information are reasonable, undue reliance should
not be placed on forward-looking information because the Company
can give no assurance that such expectations will prove to be
correct. In addition to other factors and assumptions which may be
identified in this press release, the Company’s most recent
MD&A and in the Company’s annual information form (“AIF”) and
Technical Report, assumptions have been made regarding, among other
things: the Company’s ability to carry on its exploration,
development and exploitation activities planned for the Morelos
Gold Property; material assumptions with respect to the COVID-19
pandemic, including, but not limited to: the Company being able to
resume mining and exploration operations at the ELG Mine Complex
and the Media Luna Project on or around May 18, 2020; there being
no cases of COVID-19 in the Company’s workforce no members of the
workforce are required to self-isolate; the responses of the
relevant governments to the COVID-19 pandemic being sufficient to
contain the impact of the COVID-19 pandemic; and there being no
material disruption to the Company’s supply chains and workforce
that would interfere with the Company’s mining and exploration
operations at the ELG Mine Complex and the Media Luna Project
following resumption of mining and exploration operations; and the
long-term economic effects of the COVID-19 pandemic not having a
material adverse impact on the Company’s operations or liquidity
position; the assumption that the impact of the accounting changes
to stockpiled ore will decline over the coming quarters and
averaging out at the impact expected in the original annual
guidance numbers; the assumption that the suspension decree in our
area will be lifted by May 18, 2020; assumptions with respect to
the succession plan of the Company and the Company’s business plans
and strategy; the price of gold; sufficient cash flow to satisfy
its financial covenants under the Debt Facility and service its
indebtedness, particularly in light of the COVID-19 pandemic; the
ability of the Company to satisfy other covenants under the Debt
Facility; the ability of the Company to access the ELG Mine Complex
and the Media Luna Project without disruption; the ability of the
Company to obtain qualified personnel, equipment, goods,
consumables and services in a timely and cost-efficient manner; the
timing and receipt of any required approvals and permits; the
ability of the Company to operate in a safe, efficient and
effective manner; the ability of the Company to obtain additional
financing on acceptable terms if required; the accuracy of the
Company’s mineral resource and mineral reserve estimates, annual
production, the financial analysis contained in the Technical
Report including the PEA, and geological, operational and
price assumptions on which these are based. Readers are cautioned
that the foregoing list is not exhaustive of all factors and
assumptions which may have been used. Although the Company has
attempted to identify important factors that could cause actual
results to differ materially from those contained in
forward-looking information, there may be other factors that cause
results not to be as anticipated, estimated or intended. 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. The
forward-looking information contained herein is presented for the
purposes of assisting investors in understanding the Company’s
expected financial and operating performance and the Company’s
plans and objectives and may not be appropriate for other purposes.
The Company does not undertake to update any forward-looking
information, except in accordance with applicable securities
laws.
Table 1: Operating and financial results
summary
|
|
Three Months Ended |
|
|
Mar 31, |
|
Dec 31, |
Sep 30, |
Jun 30, |
|
Mar 31, |
|
In millions of U.S. dollars, unless otherwise noted |
2020 |
|
2019 |
2019 |
2019 |
|
2019 |
|
Operating Data |
|
|
|
|
|
|
Mining |
|
|
|
|
|
|
Ore tonnes mined |
kt |
1,837 |
|
1,573 |
1,416 |
1,810 |
|
1,153 |
|
Waste tonnes mined |
kt |
11,726 |
|
10,795 |
11,923 |
11,450 |
|
12,281 |
|
Total tonnes mined |
kt |
13,563 |
|
12,368 |
13,339 |
13,260 |
|
13,434 |
|
Strip ratio 2 |
waste:ore |
6.8 |
|
7.3 |
9.1 |
6.8 |
|
11.5 |
|
Average gold grade of ore mined 4 |
gpt |
2.52 |
|
3.06 |
3.19 |
2.91 |
|
2.45 |
|
Ore in stockpile 5 |
mt |
3.1 |
|
2.4 |
1.9 |
1.7 |
|
0.9 |
|
Processing |
|
|
|
|
|
|
Total tonnes processed |
kt |
1,134 |
|
1,116 |
1,139 |
1,062 |
|
1,076 |
|
Average plant throughput |
tpd |
12,464 |
|
12,130 |
12,380 |
11,670 |
|
11,956 |
|
Average gold recovery |
% |
89 |
|
89 |
89 |
88 |
|
88 |
|
Average gold grade of ore processed |
gpt |
3.35 |
|
3.87 |
4.11 |
3.92 |
|
2.62 |
|
Production
and sales |
|
|
|
|
|
|
Gold produced |
oz |
108,537 |
|
125,151 |
138,145 |
113,645 |
|
77,870 |
|
Gold sold |
oz |
108,064 |
|
126,910 |
132,535 |
113,419 |
|
76,473 |
|
Financial Data |
|
|
|
|
|
|
Revenue |
$ |
172.0 |
|
190.0 |
198.2 |
150.7 |
|
101.9 |
|
Cost of sales |
$ |
144.1 |
|
149.0 |
130.1 |
115.7 |
|
85.1 |
|
Earnings from mine operations |
$ |
27.9 |
|
41.0 |
68.1 |
35.0 |
|
16.8 |
|
Net (loss) income |
$ |
(47.0 |
) |
35.1 |
27.4 |
10.0 |
|
(1.3 |
) |
Per share - Basic |
$/share |
(0.55 |
) |
0.41 |
0.32 |
0.12 |
|
(0.02 |
) |
Per share - Diluted |
$/share |
(0.57 |
) |
0.41 |
0.32 |
0.12 |
|
(0.02 |
) |
Adjusted net earnings (loss) 1 |
$ |
19.9 |
|
34.0 |
30.8 |
8.8 |
|
(5.7 |
) |
Per share - Basic 1 |
$/share |
0.23 |
|
0.40 |
0.36 |
0.10 |
|
(0.07 |
) |
Per share - Diluted 1 |
$/share |
0.23 |
|
0.40 |
0.36 |
0.10 |
|
(0.07 |
) |
EBITDA 1 |
$ |
39.4 |
|
102.2 |
116.6 |
74.3 |
|
37.2 |
|
Adjusted EBITDA 1 |
$ |
67.4 |
|
105.1 |
115.1 |
76.5 |
|
36.2 |
|
Cost of sales |
$/oz |
1,333 |
|
1,174 |
982 |
1,020 |
|
1,113 |
|
Total cash costs 1 |
$/oz |
794 |
|
617 |
561 |
606 |
|
745 |
|
All-in sustaining costs 1 |
$/oz |
975 |
|
767 |
675 |
760 |
|
1,161 |
|
Average realized gold price 1 |
$/oz |
1,571 |
|
1,481 |
1,478 |
1,314 |
|
1,302 |
|
Cash from operating activities |
$ |
29.5 |
|
97.9 |
122.5 |
48.6 |
|
32.3 |
|
Cash from operating activities before changes in non-cash working
capital 6 |
$ |
21.8 |
|
101.4 |
116.9 |
72.6 |
|
36.4 |
|
Free cash flow 1 |
$ |
2.1 |
|
71.6 |
96.4 |
20.6 |
|
(7.4 |
) |
Net debt 1 |
$ |
26.3 |
|
21.7 |
97.2 |
221.2 |
|
234.4 |
|
Cash and cash equivalents |
$ |
135.7 |
|
161.8 |
168.0 |
83.5 |
|
91.6 |
|
Restricted cash |
$ |
- |
|
- |
- |
32.3 |
|
26.9 |
|
Working capital (deficiency) 3 |
$ |
105.1 |
|
96.5 |
116.7 |
(27.4 |
) |
18.1 |
|
Total debt |
$ |
155.2 |
|
174.9 |
255.7 |
298.2 |
|
318.3 |
|
Total assets |
$ |
1,154.7 |
|
1,229.6 |
1,263.1 |
1,230.2 |
|
1,251.7 |
|
Total liabilities |
$ |
373.7 |
|
394.8 |
464.6 |
461.0 |
|
493.8 |
|
- Adjusted net earnings (loss), total cash costs, all-in
sustaining costs, average realized gold price, EBITDA, adjusted
EBITDA, free cash flow and net debt are financial performance
measures with no standard meaning under International Financial
Reporting Standards (“IFRS”). Refer to “Non-IFRS Financial
Performance Measures” for further information and a detailed
reconciliation.
- Ore mined from the ELG Underground (defined herein) of 101 kt
is included in ore tonnes mined and excluded from the strip ratio
in the three months ended March 31, 2020. For the three months
ended December 31, 2019, September 30, 2019, June 30, 2019, and
March 31, 2019, ore mined from the ELG Underground was 98 kt, 102
kt, 117 kt and 83 kt, respectively.
- Current liabilities at June 30, 2019 included a scheduled
repayment of $75.0 million in June 2020 under the 2017 Revolving
Facility (defined herein). As a result of the subsequent
refinancing, the $75.0 million due under the 2017 Revolving
Facility was deferred.
- Included within average gold grade of ore mined is the mined
long term, low grade inventory. Excluding the long term, low grade
inventory, the average gold grade of ore mined is 2.62 gpt for the
three months ended March 31, 2020. For the three months ended
December 31, 2019, September 30, 2019, June 30, 2019, and
March 31, 2019, the average gold grade of ore mined is 3.23 gpt,
3.37 gpt, 3.33 gpt and 2.66 gpt, respectively.
- Included within ore in stockpile is 0.9 mt of long term, low
grade inventory, with a carrying value of nil at March 31,
2020. As at December 31, 2019, September 30, 2019, June 30,
2019, and March 31, 2019, the long term, low grade inventory was
0.8 mt, 0.6 mt, 0.5 mt and 0.2 mt, respectively, with nil carrying
value. As at March 31, 2020 the long term, low grade inventory
has an average grade of 0.87 gpt.
- Cash generated from operating activities before changes in
non-cash working capital was amended to exclude current income tax
expense in order to align with changes in presentation of the
Company’s Statement of Cash Flows.
- Sum of quarters may not add to the year to date amounts due to
rounding.
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