MCEWEN MINING INC. In the following discussion, "McEwen Mining", the "Company", "we", "our", and "us" refers toMcEwen Mining Inc. and as the context requires, its consolidated subsidiaries.
The following discussion updates our plan of operation for the foreseeable future. It also analyzes our financial condition atJune 30, 2020 and compares it to our financial condition atDecember 31, 2019 . Finally, the discussion analyzes our results of operations for the three and six months endedJune 30, 2020 and compares those to the results for the three and six months endedJune 30, 2019 . With regard to properties or projects that are not in production, we provide some details of our plan of operation. We suggest that you read this discussion in conjunction with MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS and our audited consolidated financial statements contained in our annual report on Form 10-K for the year endedDecember 31, 2019 . The discussion contains financial performance measures that are not prepared in accordance with United States Generally Accepted Accounting Principles ("US GAAP" or "GAAP"). Each of the following is a non-GAAP measure: cash gross profit, cash costs, cash cost per ounce, all-in sustaining costs, all-in sustaining cost per ounce, average realized price per ounce, and liquid assets. These non-GAAP measures are used by management in running the business and we believe they provide useful information that can be used by investors to evaluate our performance and our ability to generate cash flows. These measures do not have standardized definitions and should not be relied upon in isolation or as a substitute for measures prepared in accordance with GAAP. Cash Costs equals Production Costs Applicable to Sales and is used interchangeably throughout the document. For a reconciliation of these non-GAAP measures to the amounts included in our Statements of Operations for the three and six months endedJune 30, 2020 and 2019 and to our Balance Sheets as ofJune 30, 2020 andDecember 31, 2019 and certain limitations inherent in such measures, please see the discussion under "Non-GAAP Financial Performance Measures", on page 36. This discussion also includes references to "advanced-stage properties", which are defined as properties for which advanced studies and reports have been completed indicating the presence of mineralized material or proven and probable reserves, or that have obtained or are in the process of obtaining the required permitting. Our designation of certain properties as "advanced-stage properties" should not suggest that we have or will have proven or probable reserves at those properties as defined by the Guide 7. OVERVIEW
We were organized under the laws of theState of Colorado onJuly 24, 1979 . We are engaged in the exploration, development, production and sale of gold and silver and exploration for copper. We operate inthe United States ,Canada ,Mexico andArgentina . We own a 100% interest in the Gold Bar mine inNevada , the Black Fox gold mine inOntario, Canada , theEl Gallo Project and the Fenix silver-gold project inSinaloa, Mexico , the Los Azules copper deposit inSan Juan ,Argentina , and a portfolio of exploration properties inNevada ,Canada ,Mexico andArgentina . We also own a 49% interest inMinera Santa Cruz S.A. ("MSC"), owner of the producing San José silver-gold mine inSanta Cruz ,Argentina , which is operated by the joint venture majority owner, Hochschild Mining plc. In this report, "Au" represents gold; "Ag" represents silver; "oz" represents troy ounce; "t" represents metric tonne; "gpt" represents grams per metric tonne; "ft." represents feet; "m" represents meter; "sq." represents square; and C$ refers to Canadian dollars. All of our financial information is reported inUnited States (U.S. ) dollars, unless otherwise noted. Throughout this Management's Discussion and Analysis ("MDA"), the reporting periods for the three months endedJune 30, 2020 and 2019 are abbreviated as Q2/20 and Q2/19, respectively, and the reporting periods for the six months endedJune 30, 2020 and 2019 are abbreviated as H1/20 and H1/19, respectively. In addition, in this report, gold equivalent ounces ("Au Eq. oz") includes gold and silver ounces calculated based on a 94:1 silver to gold ratio for the first quarter of 2020, 104:1 silver to gold ratio for the second quarter of 2020,
75:1
silver to gold
20
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ratio for the first quarter of 2019 and 88:1 for the second quarter of 2019.
Beginning with the second quarter of 2019, we adopted a variable silver:gold
ratio for reporting that approximates the average price during each fiscal
quarter.
Note: We ceased active mining and processing at the El Gallo mine in the second
quarter of 2018. We use the term "
Reliability of Information: MSC, the owner of the San José mine, is responsible for and has supplied to us all reported results from the San José mine. The technical information regarding the San José mine contained herein is, with few exceptions as noted, based entirely on information provided to us by MSC. Our joint venture partner, a subsidiary of Hochschild Mining plc, and its affiliates other than MSC do not accept responsibility for the use of project data or the adequacy or accuracy of this document. COVID-19 Pandemic OnMarch 11, 2020 , theWorld Health Organization ("WHO") declared the COVID-19 virus a global pandemic. During late March and early April, our operations were disrupted by temporary shutdowns to protect our workforce from the spread of the virus, as described below:
? All operations at Black Fox were temporarily suspended on
on
? Mining operations at the Gold Bar mine were suspended on
? Operating activities at the
leaching activities continued. Operations resumed
Operations at the San José mine owned by MSC (operated by our joint venture
partner) closed
? April. As of the date of this quarterly report, operations at the
are still curtailed due to travel restrictions which affect mobilization of
personnel; and
? Our head office in
employees are performing their functions remotely.
During the shutdown periods, rigorous policies and procedures have been implemented at each site to minimize potential health and safety risks to our workforce.
The temporary shutdowns adversely impacted our mine operations, cash flow, and liquidity during the second quarter of 2020, and are expected to continue to have adverse consequences to us beyond Q2/20. In addition to the adverse effect on production and revenue, we have incurred costs in connection with the shutdowns and subsequent ramp-up. The long-term impact of the COVID-19 outbreak on our results of operations, financial position and cash flows will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. Our liquidity and financial condition has been adversely affected and we are at an increased risk of not having sufficient cash flow to fund our operations and an increased risk of default under our debt agreement. Achieving and maintaining normal operating capacity is also dependent on the continued availability of supplies, which is out of our control. Management is actively monitoring the global situation on our financial condition, liquidity, operations, suppliers, industry and workforce.
During Q2/20, we incurred expenditures of
The governments ofthe United States ,Canada ,Mexico andArgentina have enacted or proposed legislation to provide relief to companies and/or individuals affected by the enforced reduction in operations. During Q2/20, we secured$1.9 million of relief from the US government under the paycheck protection program ("PPP"). The funds are fully forgivable so long as eligible expenditures are incurred in a 24-week period. We expect to comply with the forgiveness criteria. We also secured$1.5 million of government relief inCanada through the Canadian Emergency Wage Subsidy ("CEWS") program. 21 Table of Contents
Index to Management's Discussion and Analysis:
Operating and Financial Highlights 22 Selected Consolidated Financial and Operating Results 24 Consolidated Performance 24 Consolidated Financial Review 25 Liquidity and Capital Resources 26 Operations Review 28U.S.A Segment 28 Gold Bar mine operating results 28 Exploration Activities -Nevada 29 Canada Segment 30 Black Fox mine operating results 30 Exploration Activities -Timmins 31 Mexico Segment 32El Gallo Project operating results 32Advanced-Stage Properties -Fenix Project 32 MSC Segment,Argentina 33 MSC operating results 33 Los Azules Segment,Argentina 35Los Azules Project 35 Non-GAAP Financial Performance Measures 36 Critical Accounting Policies 40 Forward-Looking Statements 40 Risk Factors Impacting Forward-Looking Statements 41
OPERATING AND FINANCIAL HIGHLIGHTS
Highlights for Q2/20 are included below and discussed further under Consolidated Financial Performance:
COVID-19 shutdowns
During Q2/20, our operations were disrupted by the COVID-19 global pandemic,
which resulted in temporary shutdowns of all our operations aimed to protect
? our workforce from the spread of the virus. All operations at our operating
mines and at the
with operations at the
which affect mobilization of the personnel. Performance
? Production of 19,200 gold equivalent ounces, including 9,000 attributable gold
equivalent ounces from the San José mine(1).
? Sales of 22,400 gold equivalent ounces, including 11,600 attributable gold
equivalent ounces from the San José mine. Results of Operations
Revenue from gold and silver sales of
? gold equivalent ounces from our 100% owned properties at an average realized
price(2) of
? Cash gross loss(2) of$4.1 million ; gross loss of$8.9 million on a US GAAP basis. 22 Table of Contents
Net loss of
? million spent on exploration and advanced projects and
costs related to the temporary suspension of operations at the Gold Bar and
Black Fox mine sites.
? Cash and cash equivalents of
Exploration and Reserves
Completed 45,000 feet (14,000 meters) of underground diamond drilling in the
?
gold resources adjacent to the existing Black Fox ore body.
Continued drilling at Gold Bar South and verified extended mineralization
? towards the south of the deposit. Subject to permitting advancing as planned,
the mining of Gold Bar South could begin in the second half of 2021.
Continued the review of our Gold Bar mine reserve. Completion of a new resource
? estimate and mine plan are being finalized in the third quarter of 2020. A new
reserve estimate is expected in the fourth quarter of 2020.
(1) At our 49% attributable interest.
As used here and elsewhere in this report, this is a Non-GAAP financial (2) performance measure. See "Non-GAAP Financial Performance Measures" beginning
on page 36.
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SELECTED CONSOLIDATED FINANCIAL AND OPERATING RESULTS
The following tables present select financial and operating results of our
company for the three and six months ended
Three months ended June 30, Six months ended June 30,
2020 2019 2020 2019
(in thousands, except per share)
Revenue from gold and silver sales(1) $ 18,291 $ 36,383 $ 49,691 $ 51,966
Production costs applicable to sales $ (22,354) $ (24,699) $ (50,741) $ (35,848)
Loss before income and mining taxes $ (19,844) $ (13,515) $ (120,129) $ (23,533)
Net loss(2) $ (19,814) $ (13,014) $ (119,005) $ (23,150)
Net loss per share(2) $ (0.05) $ (0.04) $ (0.30) $ (0.07)
Cash (used in) provided by operating
activities $ (8,191) $ 1,669 $ (20,099) $ (9,152)
Cash additions to mineral property
interests and plant and equipment $ 3,000 $ 7,972 $ 8,503 $ 24,484 (1) Excludes revenue from the San José mine, which is accounted for under the
equity method.
(2) Results for the six months ended
of $83.8 million , or $0.21 per share.
Three months ended June 30, Six months ended June 30,
2020 2019 2020 2019
(in thousands, except per ounce)
Produced - gold equivalent ounces(1) 19.2 45.9 54.2 82.2
100% owned operations 10.2 22.7 30.4 39.1
San José mine (49% attributable) 9.0 23.2 23.8 43.1
Sold - gold equivalent ounces(1) 22.4 51.9 54.9 83.5
100% owned operations 10.8 28.1 31.1 40.5
San José mine (49% attributable) 11.6 23.8 23.8 43.0
Average realized price ($/Au Eq. oz)(2)(3) $ 1,733
$ 1,711 $ 1,309 $ 1,645 $ 1,307
Cash cost per ounce ($/Au Eq. oz sold):(2)
100% owned operations $ 2,170 $ 863 $ 1,641 $ 857
San José mine (49% attributable) $ 1,280 $ 960 $ 1,207 $ 865
AISC per ounce ($/Au Eq. oz sold):(2)
100% owned operations $ 2,719 $ 1,152 $ 2,086 $ 1,262
San José mine (49% attributable) $ 1,476 $ 1,207$ 1,535 $ 1,165 Cash gross (loss) profit(2)$ (4,063) $ 11,684 $ (1,050) 16,118 Silver : Gold ratio(1) 104:1 88:1 100:1 82:1
(1) Silver production is presented as a gold equivalent; silver:gold ratio of
104:1 for Q2/20 and 88:1 for Q2/19. See page 20.
As used here and elsewhere in this report, this is a Non-GAAP financial (2) performance measure. See "Non-GAAP Financial Performance Measures" beginning
on page 36.
(3) On sales from 100% owned operations only, excluding sales from our stream.
CONSOLIDATED PERFORMANCE For Q2/20, we reported a net loss of$19.8 million (or$0.05 per share) compared to$13.0 million in Q2/19 (or$0.04 per share), with the increase in 2020 reflecting a$15.7 million decrease in cash gross profit as a result of less gold and silver ounces produced and sold, significantly higher cash cost per ounce, partially offset by higher realized gold prices. Higher cash cost per ounce was mainly due to fewer gold equivalent ounces produced and sold, with production significantly impacted by temporary mine suspensions at all of our operations as a result of steps taken to stop the spread of COVID-19, along with operational issues at several mines. Cash gross loss in Q2/20 was partially offset by$2.2 million lower depreciation and depletion expenses, reflecting fewer gold equivalent ounces produced and sold,$2.4 million lower exploration expenditures, a$3.1 million decrease in loss from investment inMinera Santa Cruz S.A. , and a$2.6 million increase in other income, all compared to Q2/19. 24 Table of Contents Starting in Q2/19, we adopted a variable silver:gold ratio for reporting gold equivalent ounces produced and sold, which approximates the average market ratio during the period; previously we used a fixed 75:1 silver:gold ratio. The change in the silver:gold ratio primarily impacts gold equivalent ounces produced and sold as well as cash cost and all-in sustaining cost per gold equivalent ounce for the San José mine.
Production from our 100% owned mines were 10,200 gold equivalent ounces in Q2/20, which decreased by 12,500 gold equivalent ounces, or 55%, compared to Q2/19. The decline reflects the temporary shutdown of operations at our sites as a result of steps taken to stop the spread of COVID-19, coupled with the expected lower production at theEl Gallo Project (3,500 fewer ounces), as theEl Gallo Project has been in residual leaching sinceJune 2018 . Our share of the San José mine production was 9,000 gold equivalent ounces in Q2/20, which was 14,200 ounces, or 61%, lower than in Q2/19 mainly due to a nationwide mandatory quarantine imposed inArgentina to combat the spread of COVID-19. Although the mine was able to restart operations in late April, the operations remain below capacity due to government imposed travel restrictions that continue to pose significant challenges in mobilizing personnel to the
site. CONSOLIDATED FINANCIAL REVIEW Revenue from gold and silver sales in Q2/20 decreased by 50% to$18.3 million compared to Q2/19, reflecting 17,300, or 62%, fewer gold equivalent ounces sold from our 100% owned mines, partly offset by a higher average realized price per ounce compared to same period in 2019 ($1,733 /oz in Q2/20 or$415 /oz higher). The decrease in gold equivalent ounces sold in Q2/20 is due to lower production reflecting the adverse effects of the temporary suspension of operations at all of our operations, the subsequent ramp-up period in which we operated below normal capacity and other operational issues affecting our Gold Bar and Black Fox mine sites. Revenue from gold and silver sales in H1/20 decreased by 4% to$49.7 million compared to H1/19, reflecting 9,400, or 23%, fewer gold equivalent ounces sold from our 100% owned mines, which was almost totally offset by a higher average realized price per ounce compared to same period in 2019 ($1,641 /oz in H1/20 or$328 /oz higher). In addition, reduced production in Q2/20 due to the pandemic was partially offset by increased production at the Gold Bar mine in the first quarter of 2020 compared to the first quarter of 2019. The decrease in gold equivalent ounces sold in H1/20 is mainly due to lower production in Q2/20
as noted above.
Production Costs applicable to sales in Q2/20 decreased by 9% to
Production Costs applicable to sales in H1/20 increased by 42% to$50.7 million compared to H1/19, despite 23% less gold equivalent ounces sold, which was more than offset by a significantly higher cost per ounce at all our operations (details in the "Operations Review" section).
Depreciation and depletion for Q2/20 decreased by 31% (
Depreciation and depletion for H1/20 increased by 15% ($1.5 million ) to$11.5 million compared to H1/19, despite 23% fewer gold ounces sold, reflecting more gold ounces sold from the Gold Bar mine in H1/20 at a higher depreciation and depletion per ounce sold which more than offset the impact of fewer ounces sold fromEl Gallo and Black Fox. BothEl Gallo and Black Fox have a lower depreciation and depletion per ounce than the Gold Bar mine. Advanced projects costs for Q2/20 and H1/20 increased to$2.9 million and$5.4 million , or 38% and 15% higher, respectively, compared to the same periods of 2019. Advanced projects in Q2/20 and H1/20 included spending for advancing the Froome project inTimmins, Ontario , expenditures related to property holding payments and other spending for the Fenix project inMexico and engineering and permit work at the Gold Bar South property inNevada .
Exploration costs of
25
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requirements to satisfy in 2020. During H1/19,
General and administrative expenses of$2.2 million and$4.3 million in Q2/20 and H1/20, respectively, decreased by 29% and 21% compared to 2019 as a result of the reduction of corporate activities in 2020. Loss from investment in MSC of$1.0 million and$3.7 million in Q2/20 and H1/20, decreased by 75% and 42% compared to the same periods of 2019, reflecting significantly higher gross profit of$9.0 million and$10.8 million in Q2/20 and H1/20, respectively, compared to$2.9 million and$6.8 million in Q2/19 and H1/19; and$1.9 million current and deferred income and mining tax recovery for Q2/20 and H1/20 compared to$3.0 million and$3.8 million current and deferred income and mining tax expense in 2019. Both higher gross profit and current and deferred income and mining tax recovery in 2020 were partially offset by$5.9 million and$7.2 million of other expenses incurred during the shutdown of operations in Q2/20 and H1/20, respectively. Higher gross profit in 2020 was mainly due to higher average realized gold and silver prices (36% and 32% higher gold price and 32% and 10% higher silver price in Q2/20 and H1/20, respectively), despite fewer gold equivalent ounces sold and$5.3 million operating costs due to the COVID-19 pandemic (labor costs for idle employees, additional transportation and accommodation costs to maintain social distancing and additional personal protective equipment).
Revision of estimates and accretion of asset retirement obligations of
Impairment of Gold Bar mine mineral property interests and plant and equipment carrying value for H1/20 was$83.8 million . During H1/20, we performed a comprehensive review of our Gold Bar mine and determined that indicators of impairment existed. A recoverability test was performed and we concluded that the carrying value of the long-lived assets for the Gold Bar mine was impaired based on a reduction in preliminary estimated resources and expected future production.
Other operating of
Interest and other finance expense, net was$1.8 million and$3.6 million in Q2/20 and H1/20 compared to$2.8 million and$3.3 million in Q2/19 and H1/19. Expenses for Q2/19 included interest and other charges associated with the final ruling against the Company in relation to our lawsuit filed in respect of the constitutional validity of the Mexican Tax Reform issued onOctober 31, 2013 . The Tax Reform included a 0.5% precious metals royalty applicable to the Company. Other income of$3.0 million and$4.0 million for Q2/20 and H1/20, respectively, increased by$2.5 million when compared to Q2/19 and H1/19, mainly due to the$1.9 million and$1.5 million of COVID-19 relief payments received from the US paycheck protection program and the Canadian Emergency Wage Subsidy program, respectively. Income and mining tax recovery of$0.1 million and$1.1 million , respectively, for Q2/20 and H1/20, compared to$0.5 million and$0.4 million in the same periods of 2019. The changes in the income and mining tax recovery primarily reflect the fluctuations of the Argentine and Mexican pesos against theU.S. dollar, causing fluctuations to the Company's deferred tax liabilities denominated in the respective foreign currency.
LIQUIDITY AND CAPITAL RESOURCES
Our cash balance atJune 30, 2020 of$18.4 million decreased from$46.5 million atDecember 31, 2019 , reflecting$8.5 million invested in mineral property interests and plant and equipment and$20.1 million cash used in operations, including a$5.9 million reduction in accounts payable and accrued liabilities. Working capital atJune 30, 2020 of$25.5 million decreased by$17.7 million fromDecember 31, 2019 , reflecting the decrease in cash and cash equivalents of$28.1 million , which was partly offset by$10.0 million of current debt as ofDecember 31, 2019 reclassified to non-current liabilities due to the two-year extension of the principal repayments under the Amended and Restated Credit Agreement ("ARCA") closed onJune 25, 2020 and the$5.9 million reduction in 26 Table of Contents
accounts payable and accrued liabilities mentioned above. For more details on ARCA, refer to Note 11 to the Consolidated Financial Statements, Debt.
Cash used in operations of$20.1 million in H1/20 compared to$9.2 million cash used in operations in H1/19, with the change reflecting$17.2 million lower cash gross profit mainly due to lower revenue and higher costs, from the sale of fewer ounces. The lower cash gross margin was partially offset by less exploration spending due to not having any flow-through spending commitments and an increase in other income as a result of COVID-19 relief funds received. Cash used in investing activities of$7.9 million in H1/20 decreased significantly compared to$22.5 million in H1/19, with the reduction primarily due to$16.0 million less spending for mineral property interests and plant and equipment as the construction of the Gold Bar mine was completed inMay 2019 . This decrease was partially offset by lower dividends received from MSC in H1/20 ($0.3 million in 2020 compared to$2.0 million in 2019). During H1/20, we spent$8.5 million on mineral property and plant and equipment, predominately for capital development at the Black Fox mine and infill drilling at the Gold Bar mine.
Financing activities used
Going concern In the preparation of the interim financial statements, management is required to identify when events or conditions indicate that substantial doubt may exist about the Company's ability to continue as a going concern. Substantial doubt about the Company's ability to continue as a going concern would exist when relevant conditions and events, considered in aggregate, indicate that the Company will not be able to meet its obligations as they become due for a period of at least, but not limited to, 12 months from the balance sheet date. When the Company identifies conditions or events that raise potential for substantial doubt about its ability to continue as a going concern, the Company considers whether its plans that are intended to mitigate those relevant conditions or events will alleviate the potential substantial doubt. InJune 2020 , the Company refinanced its senior secured term loan facility (for more refer to Note 11 to the Consolidated Financial Statements, Debt) and was in full compliance with financial covenants as atJune 30, 2020 . However, as a result of the significant expected resource reduction at the Gold Bar mine, resulting in an initial revised mine plan which yields less cash flow, coupled with operational challenges at Black Fox, and the disruptions to the Company's operations caused by the COVID-19 pandemic, there is uncertainty about our ability to both generate sufficient operating cash flow to conduct further operation, exploration and development of our mineral properties and to remain in compliance with certain of our financial covenants over the next 12 months. Non-compliance with these covenants would result in a breach under the Company's debt agreement. In response to this uncertainty, we are evaluating options to raise additional equity and curtail expenditures. Our ability to continue as a going concern is dependent on the successful completion of one or both of these initiatives to ensure that we have sufficient liquidity in order to fund our operations and remain in compliance with our debt covenants. After considering these plans, management has concluded that there are no material uncertainties relating to events or conditions that may cast substantial doubt upon the our ability to continue as a going concern for a period of 12 months from the consolidated balance sheet date. The estimates used by management in reaching this conclusion are based on information available as at the date these financial statements were authorized for issuance, and include internally generated cash flow forecasts. Accordingly, actual results could differ from these estimates and resulting variances may be material to management's assessment. 27 Table of Contents OPERATIONS REVIEWU.S.A. Segment
The
Gold Bar Mine The following table sets out certain operating results for the Gold Bar mine for the three and six months endedJune 30, 2020 and 2019. As the Gold Bar mine achieved commercial production onMay 23, 2019 , the comparatives for cash costs, cash cost per ounce, all-in sustaining costs and all-in sustaining costs per ounce for the three and six months endedJune 30, 2019 include sales and costs from pre-commercial production during the first months of 2019: Three months ended June 30, Six months ended June 30, 2020 2019 2020 2019 Operating Results (in thousands, unless otherwise indicated) Mined mineralized material (t) 65 404 492 670 Average grade (gpt Au) 0.82 0.98 0.69 0.98 Processed mineralized material (t) 108 474 583 823 Average grade (gpt Au) 0.77 0.99 0.66 0.91 Gold ounces: Produced 6.1 7.9 15.2 10.0 Sold 6.2 8.7 15.3 9.4 Silver ounces: Produced 0.1 0.1 0.3 0.2 Sold 0.6 - 0.6 - Gold equivalent ounces: Produced 6.1 7.9 15.2 10.0 Sold 6.2 8.7 15.3 9.4 Revenue from gold and silver sales $ 10,770$ 11,522 $ 25,088 $ 12,364 Cash costs(1) $ 11,039$ 7,835 $ 28,071 $ 8,643 Cash cost per ounce ($/Au Eq. oz sold)(1) $ 1,772 $ 901$ 1,840 $ 924 Allin sustaining costs(1) $ 15,336$ 9,466 $ 34,985 $ 10,821 AISC per ounce ($/Au Eq. oz sold)(1) $ 2,462$ 1,088 $ 2,293 $ 1,157 Silver : gold ratio 104 : 1 88 : 1 100 : 1 88 : 1
As used here and elsewhere in this report, this is a Non-GAAP financial (1) performance measure. Cash costs for the Company's 100% owned operations equal
Production costs applicable to sales. See "Non-GAAP Financial Performance
Measures" beginning on page 36 for additional information.
In Q2/20, Gold Bar produced 6,100 gold equivalent ounces. We decided to cease
mining on April 1st due to concerns about the COVID-19 pandemic, and commenced
the ramping up of production on May 4th with significant safety measures in
place to combat spread of COVID-19. Throughout May and June, the mine only
operated on day shift as work progressed for the updated resource model, new
mine plan and to address engineering design deficiencies. Full operations with
day and night shifts are scheduled to resume in September with ramp up of
production and the anticipated implementation of mining cycle improvements.
Production costs applicable to sales were $11.0 million in Q2/20, compared to
$7.8 million in Q2/19, reflecting a higher drawdown of gold ounces from our heap
leach and in-circuit inventory balances. Production costs applicable to sales
was $28.1 million in H1/20, compared to $8.6 million in H1/19, reflecting 63%
more gold equivalent ounces sold in H1/20 and higher drawdown of gold ounces
from our inventories as noted above.
Cash cost and AISC per gold equivalent ounce of $1,772 and $2,462 in Q2/20 were
negatively impacted by lower tonnes mined and placed on the heap leach pad due
to the COVID-19 temporary suspensions and slower ramp up, which resulted in
fewer gold ounces produced and sold.
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Cash cost and AISC per gold equivalent ounce of
Gold Bar mine impairment
In Q1/20, we recorded an impairment charge of
Evaluation of the resource estimate continued in the second quarter of 2020. New drilling information is being incorporated into a revised resource model. Completion of a new resource estimate, mine plan and 2020 forecast are being finalized in the third quarter of 2020. A new reserve estimate is expected
in the fourth quarter of 2020.
Exploration Activities -
In Q2/20 and H1/20, we spent$1.6 million and$2.0 million , respectively, on exploration activities in and around the Gold Bar mine, compared to$1.2 million and$1.7 million spent on same activities in Q2/19 and H1/19.
Exploration drilling was conducted in and around the Pick West pit in Q2/20 and has increased our confidence in the revised geologic model and demonstrated potential near mine exploration opportunities.
Drilling at the Gold Bar South satellite deposit continued in Q2/20 and we
verified extended mineralization toward the south of the deposit. Permitting for
development and production from Gold Bar South is also in progress and we expect
to start mining this satellite deposit in the second half of 2021.
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Canada Segment
The Canada segment is comprised of the Black Fox Complex , which includes the
Black Fox gold mine and the Grey Fox, Stock and Froome advanced-stage projects,
the Stock mill, and other gold exploration properties located in Timmins,
Ontario, Canada .
Black Fox Mine
The Black Fox mine currently has less than one year remaining in its expected
mine life. We continue our near-mine exploration efforts with the goal of
increasing resources, converting resources to reserves and extending the mine
life.
We commenced the development of the access to the Froome underground deposit in
late February 2020 and advanced 30% of the way to the orebody as of June 30,
2020 . The plan is to reach the orebody in the second quarter of 2021, complete
the necessary development and start production from Froome in the fourth quarter
of 2021.
The following table sets out certain operating results for the Black Fox mine
for the three and six months ended
Three months ended June 30, Six months ended June 30,
2020 2019 2020 2019
Operating Results (in thousands, unless otherwise indicated)
Mined mineralized material (t) 32 47 72 97
Average grade (gpt Au) 2.25 3.81 3.55 5.17
Processed mineralized material (t) 41 52 97 106 Average grade (gpt Au) 2.15 4.29 2.95 5.51 Gold equivalent ounces: Produced 2.2 9.4 10.5 18.4 Sold 2.6 12.7 11.2 20.0 Revenue from gold and silver sales $ 4,166$ 16,049 $ 16,905 $ 24,992 Cash costs $ 8,150$ 10,639 $ 15,357 $ 16,475 Cash cost per ounce ($/Au Eq. oz sold) $ 3,121 $ 837$ 1,369 $ 826 Allin sustaining costs $ 8,700$ 15,192 $ 20,219 $ 26,158 AISC per ounce ($/Au Eq. oz sold) $ 3,332 $
1,196$ 1,803 $ 1,311 Silver : gold ratio 104 : 1 88: 1 100 : 1 82 : 1
Production in Q2/20 and H1/20 was significantly impacted by the suspension of mining activities fromMarch 26th to April 13th to protect our workers from COVID-19, coupled with the staged ramp-up back into production. A progressive return to work was completed by the end of April and for the remainder of the quarter, production was lower due to lower than expected grade and prioritization of development work to establish a greater number of mining areas in order to improve future operational flexibility. This resulted in 76% and 43% decreases in gold equivalent ounces produced in Q2/20 and H1/20, respectively, when compared to the same periods of 2019. Revenue from gold and silver sales decreased in Q2/20 and H1/20 by$11.8 million and$8.1 million , respectively, compared to Q2/19 and H1/19, reflecting the decrease in gold equivalent ounces produced and sold, which was partially offset by higher average realized gold prices in 2020. Production costs applicable to sales decreased by$2.5 million or 23% in Q2/20 compared to Q2/19, reflecting a 79% decrease in gold equivalent ounces sold, partly offset by a 273% increase in cash cost per gold equivalent ounce, the latter mainly due to the impact of 50% lower average grade of processed mineralized material in Q2/20 as compared to Q2/19. In addition, production costs applicable to sales in Q2/10 included$1.7 million of underground development that was not capitalized given the mine life is less than one year. 30 Table of Contents Production costs applicable to sales decreased by$1.1 million or 7% in H1/20 compared to H1/19, reflecting a 44% decrease in gold equivalent ounces sold, partly offset by a 66% increase in cash cost per gold equivalent ounce, the latter mainly due to the impact of 47% lower average grade of processed mineralized material in H1/20 compared to H1/19, along with the$1.7 million of underground development costs, discussed above, included in production costs applicable to sales in H1/20. All-in sustaining costs decreased by$6.5 million or 43% and$6.0 million or 23% in Q2/20 and H1/20, respectively, compared to Q2/19 and H1/19, mainly due to significantly fewer gold equivalent ounces produced and sold as a result of the temporary suspension of mining activities and the progressive return back into production noted above.
Exploration Activities -
In 2020, we continued to focus on the primary goal of growing the resources and reserves adjacent to our existing operations in order to contribute to near-term gold production. We incurred$0.8 million and$3.2 million in Q2/20 and H1/20, respectively for exploration initiatives, compared to$4.1 million and$6.5 million of exploration expenditures in Q2/19 and H1/19. Drilling was suspended onMarch 26th as part of the suspension of mining operations due to the COVID-19 pandemic and resumed onApril 13th . We also had flow-through exploration commitments to satisfy in 2019, which resulted in a larger drill program for 2019, including H1/19.Black Fox Mine
A total of 44,800 feet (13,650 meters) of underground diamond drilling was completed during the second quarter of 2020, focusing on identifying and building additional underground resources adjacent to the Black Fox ore body.
Drilling during the quarter included the delineation and expansion of the mine's western mineralization, with 70% devoted to closely spaced definition drilling of gold mineralization within or adjacent to upcoming mining blocks. Exploration is continuing on the upper west flank of the mine, which delivered high-grade results that are now being further defined.
No drilling activities were conducted during Q2/20 as our technical team focused their efforts and expenditures toward advancing the economic potential of the Black Fox deposit. Environmental field studies have been initiated to assist with the permitting application process.Grey Fox's scoping study is expected to be issued by end of year.
A three-phase program of surface drilling has been designed for advancing our Stock West discovery target located 1,000 feet (300 meters) west from the historic Stock mine workings.
Froome
Excavation of the 800-metre access ramp, into the base of the Froome Deposit, is
now proceeding as scheduled. A total of 1,765 feet (538 metres) of advance was
completed by the end of Q2/20. We expect to achieve commercial production from
the Froome Deposit in the fourth quarter of 2021.
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Mexico Segment
The
El Gallo Project
Current activities at the
The economics of residual leaching are measured by incremental revenues exceeding incremental costs. Residual leaching is expected to continue as long as incremental revenues exceed incremental costs. Incremental residual leaching costs for the three and six months endedJune 30, 2020 were$2.4 million or$1,262 per gold equivalent ounce sold and$5.2 million or$1,124 per gold equivalent ounce sold, respectively, compared to$2.8 million or$412 and$5.6 million or$506 per gold equivalent ounce sold in the same periods of 2019.
The following table summarizes certain operating results at the
Three months ended June 30, Six months ended June 30,
2020 2019 2020 2019
Operating Results (in thousands, unless otherwise indicated)
Gold ounces:
Produced 1.9 5.3 4.6 10.8
Sold 1.9 6.7 4.6 11.2
Silver ounces:
Produced 0.5 1.2 1.2 2.6
Sold 1.9 0.2 1.9 0.2
Gold equivalent ounces:
Produced 1.9 5.4 4.6 10.8
Sold 1.9 6.7 4.6 11.2
Revenue from gold and silver sales $ 3,355 $ 8,812 $ 7,698 $ 14,610
Silver : gold ratio 104 : 1 88 : 1 100 : 1 82 : 1
Production and revenue decreased in Q2/20 and H1/20, compared to Q2/19 and
H1/19, reflecting decreasing recoveries, as expected, as the
The decrease in revenue, due to decrease in production, was partially offset by a significantly higher average realized gold price during Q2/20 and H1/20, compared to the same periods of 2019.
Strengthening gold and silver prices have renewed our focus on advancing the
Mine permitting continued to progress during 2020, building upon the
environmental permit approval for in-pit tailings storage in the Samaniego pit
and the additional approval for the process plant for phase 1 received in
We incurred$0.5 million and$1.2 million in Q2/20 and H1/20, respectively, on activities required to advance theFenix Project as well as property holding payments for land titles. This compares to$0.8 million and$1.6 million spent during Q2/19 and H1/19. The Fenix Project PEA is available for review on our website and SEDAR (www.sedar.com). 32 Table of Contents MSC Segment,Argentina
The MSC segment is comprised of the San José mine, located in
MSC - Operating Results
The following table sets out certain operating results for the San José mine for
the three and six months ended
Three months ended June 30, Six months ended June 30,
2020 2019 2020 2019
Operating Results (in thousands, except otherwise indicated)
San José Mine-100% basis
Mined mineralized material (t) 73 131 179 259
Average grade mined (gpt)
Gold 5.3 6.5 6.6 6.8
Silver 370 428 449 464
Processed mineralized material (t) 77 142 162 252
Average grade processed (gpt)
Gold 5.0 6.9 6.4 6.9
Silver 329 436 401 446
Average recovery (%):
Gold 89.8 88.0 89.2 88.1
Silver 89.2 87.3 88.8 87.5
Gold ounces:
Produced 11.3 27.6 29.6 49.1
Sold 15.1 28.2 29.7 48.9
Silver ounces:
Produced 732 1,731 1,858 3,162
Sold 904 1,785 1,868 3,189
Gold equivalent ounces:
Produced 18.3 47.3 48.6 87.9
Sold 23.8 48.5 48.6 87.9
Revenue from gold and silver sales $ 47,081 $ 65,997 $ 84,471 $ 114,818
Average realized price:
Gold ($/Au oz) $ 1,893 $ 1,392 $ 1,796 $ 1,361
Silver ($/Ag oz) $ 20.55 $ 15.01 $ 16.67 $ 15.14
Cash costs $ 30,402 $ 46,514 $ 58,718 $ 76,047
Allin sustaining costs $ 35,046 $ 58,477 $ 74,657 $ 102,433
Cash cost per ounce ($/Au Eq. oz sold) $ 1,280 $ 960 $ 1,207 $ 865
AISC per ounce ($/Au Eq. oz sold) $ 1,476 $ 1,207 $ 1,535 $ 1,165
Silver : gold ratio 104 : 1 88 : 1 98 : 1 82 : 1
The analysis below compares the operating and financial results of MSC on a 100% basis.
Q2/20 compared to Q2/19 Gold and silver production decreased by 59% and 58%, respectively, in Q2/20 compared to Q2/19 as a result of a 45% decrease in processed mineralized material, coupled with 27% and 24% decreases in the average grades of gold and silver, respectively, of the mineralized material processed in Q2/20. The decrease in processed mineralized material reflected the temporary shutdown due to the pandemic and the fact that theSan Jose Mine operated below capacity for the remainder of Q2/20 due to the COVID-19 related government imposed travel restrictions that pose significant challenges in mobilizing personnel to the site. As a result of labor challenges, mining activities focused on more mechanized, and less labor intensive, extractive methods resulting in mining from certain lower grade stopes and higher dilution. Gold and silver production decreased by 40% and 41%, respectively, in H1/20 compared to H1/19 due to a 35% decrease in processed mineralized material and 8% and 10% decreases in the average grades of gold and silver of the mineralized material processed in H1/20, mainly due to the operational and labor challenges experienced in Q2/20. 33 Table of Contents Revenue from gold and silver sales decreased by 29% and 26% in Q2/20 and H1/20 respectively, compared to Q2/19 and H1/19, reflecting fewer gold equivalent ounces sold (51% and 45% fewer gold equivalent ounces sold, respectively), due to lower production as noted above, partly offset by higher average realized price of gold (36% and 32% higher in Q2/20 and H1/20, respectively, compared to the same periods of 2019) and silver (37% and 10% higher in Q2/20 and H1/20, respectively, compared to 2019). Cash costs in Q2/20 and H1/20 decreased by$16.1 million , or 35%, and$17.3 million , or 23%, respectively, compared to Q2/19 and H1/19, reflecting lower tonnes of mineralized material processed and fewer ounces produced and sold. All-in sustaining costs for Q1/20 and H1/20 decreased by$23.5 million or 40% and$27.7 million or 27%, compared to the same periods of 2019, mainly due to lower cash costs, coupled with lower site exploration expenses, capitalized underground mine development and sustaining capital investment in plant and equipment. Cash cost and All-in sustaining cost per gold equivalent ounce sold were higher for Q2/20 and H1/20 compared to the same periods in 2019, as lower aggregate cash costs and AISC were spread over 51% and 45% fewer gold equivalent ounces sold, respectively, as noted above. Investment in MSC
Our 49% attributable share of operations from our investment in MSC was a loss of$1.0 million and$3.7 million in Q2/20 and H1/20, compared to a loss of$4.1 million and$6.4 million in Q2/19 and H1/19, reflecting significantly higher gross profit of$9.0 million and$10.8 million in Q2/20 and H1/20, respectively, compared to$2.9 million and$6.8 million in Q2/19 and H1/19; and$1.9 million current and deferred income and mining tax recovery for Q2/20 and H1/20 compared to$3.0 million and$3.8 million current and deferred income and mining tax expense in 2019. Both higher gross profit and current and deferred income and mining tax recovery in 2020 were partially offset by$5.9 million and$7.2 million of other expenses incurred during the shutdown of operations in Q2/20 and H1/20, respectively.
Higher gross profit in 2020 was mainly due to higher average realized gold and silver prices, despite fewer gold equivalent ounces sold and$5.3 million operating costs due to the COVID-19 pandemic (labor costs for idle employees, additional transportation and accommodation costs to maintain social distancing and additional personal protective equipment). In Q2/20, on a 100% basis, MSC generated a cash gross profit of$16.7 million and incurred$4.0 million of development and other capital expenditures,$2.2 million of exploration spending and$8.9 million of other expenditures, with the latter primarily including$5.9 million related to costs of suspending activities in connection with the COVID-19 pandemic and foreign exchange losses. In H1/20, on a 100% basis, MSC generated a cash gross profit of$25.8 million and incurred$12.6 million of development and other capital expenditures,$5.0 million of exploration spending and$11.1 million of other expenditures, with the latter primarily including$7.2 million related to costs of suspending activities in connection with the COVID-19 pandemic and foreign exchange losses.
MSC Dividend Distribution (49%)
We received$0.3 million in dividends from MSC in Q2/20 and H1/20, compared to $nil and$2.0 million in dividends received during the same periods in 2019. For more details on our Investment in MSC, refer to Note 10 to the Consolidated Financial Statements, Investment inMinera Santa Cruz S.A. ("MSC") - San José mine. 34 Table of Contents
Los Azules Segment,
Los Azules project is a copper exploration project located in
Los Azules Project During Q2/20, the environmental baseline monitoring work continued as planned. We expect to continue environmental studies the rest of the year to gather further information necessary for the Environmental Impact Assessment for the next development phase.
The preliminary economic assessment for the
35
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NON-GAAP FINANCIAL PERFORMANCE MEASURES
We have included in this report certain non-GAAP financial performance measures as detailed below. In the gold mining industry, these are common performance measures but do not have any standardized meaning and are considered non-GAAP measures. We use these measures in evaluating our business and believe that, in addition to conventional measures prepared in accordance with GAAP, certain investors use such non-GAAP measures to evaluate our performance and ability to generate cash flow. Accordingly, they are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. There are limitations associated with the use of such non-GAAP measures. We compensate for these limitations by relying primarily on ourU.S. GAAP results and using the non-GAAP measures supplementally. The non-GAAP measures are presented for our wholly owned mines and the San José mine. The GAAP information used for the reconciliation to the non-GAAP measures for the San José mine may be found in Note 10, Investment inMinera Santa Cruz S.A. ("MSC") - San José Mine. We do not control the interest in or operations of MSC and the presentations of assets and liabilities and revenues and expenses of MSC do not represent our legal claim to such items. The amount of cash we receive is based upon specific provisions of the Option and Joint Venture Agreement ("OJVA") and varies depending on factors including the profitability of the operations.
The presentation of these measures, including those for MSC, has limitations as an analytical tool. Some of these limitations include:
? The amounts shown on MSC's individual line items do not represent our legal
claim to its assets and liabilities, or the revenues and expenses; and
Other companies in our industry may calculate their cash gross profit, cash
? costs, cash cost per ounce, all in sustaining costs, all in sustaining cost per
ounce, average realized price per ounce, and liquid assets differently than we
do, limiting the usefulness as a comparative measure. Cash Gross Profit Cash gross profit is a non-GAAP financial measure and does not have any standardized meaning. We use cash gross profit to evaluate our operating performance and ability to generate cash flow; we disclose cash gross profit as we believe this measure provides valuable assistance to investors and analysts in evaluating our ability to finance our ongoing business and capital activities. The most directly comparable measure prepared in accordance with GAAP is gross profit or loss. Cash gross profit is calculated by adding back the depreciation and depletion expense to gross profit or loss.
The following tables present a reconciliation of cash gross profit to the most directly comparable GAAP measure, gross profit or loss:
Three months ended June 30, 2020 Six months ended June 30, 2020
Total (100% Total (100%
Gold Bar Black Fox El Gallo owned) Gold Bar Black Fox El Gallo owned)
(in thousands) (in thousands)Gross (loss) profit$ (2,834) $ (6,168) $ 127 $ (8,875) $ (9,411) $ (3,384) $ 235 $ (12,560) Add: Depreciation and depletion 2,565 2,184 63 4,812 6,428 4,932 150 11,510 Cash gross (loss) profit$ (269) $ (3,984) $ 190 $ (4,063) $ (2,983) $ 1,548 $ 385 $ (1,050) Three months ended June 30, 2019 Six months ended June 30, 2019 Total (100% Total (100% Gold Bar Black Fox El Gallo owned) Gold Bar Black Fox El Gallo owned) (in thousands) (in thousands)
Gross profit (loss)$ 1,119 $ 1,189 $ 2,369 $ 4,677 $ 1,001 $ 1,586 $ 3,518 $ 6,105 Add: Depreciation and depletion 2,568 4,221 218 7,007 2,720 6,931 362 10,013 Cash gross profit$ 3,687 $ 5,410 $ 2,587 $ 11,684 $ 3,721 $ 8,517 $ 3,880 $ 16,118 36 Table of Contents Three months ended June 30, Six months ended June 30, 2020 2019 2020 2019 San José mine cash gross profit (100% basis) (in
thousands)
Gross profit$ 9,029 $ 2,938 $ 10,776 $ 6,846 Add: Depreciation and depletion 7,650 16,545
14,977 31,925
Cash gross profit $ 16,679 $ 19,483 $ 25,753 $ 38,771 Cash Costs and All-In Sustaining Costs
The terms cash costs, cash cost per ounce, all-in sustaining costs, and all-in sustaining cost per ounce used in this report are non-GAAP financial measures. We report these measures to provide additional information regarding operational efficiencies on an individual mine basis, and believe these measures provide investors and analysts with useful information about our underlying costs of operations. Cash costs consist of mining, processing, on-site general and administrative expenses, community and permitting costs related to current operations, royalty costs, refining and treatment charges (for both doré and concentrate products), sales costs, export taxes and operational stripping costs, but exclude depreciation and amortization, which are non-cash items. The sum of these costs is divided by the corresponding gold equivalent ounces sold to determine a per ounce amount. All-in sustaining costs consist of cash costs (as described above), plus accretion of retirement obligations and amortization of the asset retirement costs related to operating sites, environmental rehabilitation costs for mines with no reserves, sustaining exploration and development costs, sustaining capital expenditures and sustaining lease payments. Our all-in sustaining costs exclude the allocation of corporate general and administrative costs. Following is additional information regarding our all-in sustaining costs:
Sustaining operating costs represent expenditures incurred at current
operations that are considered necessary to maintain current annual production
at the mine site and include mine development costs and ongoing replacement of
? mine equipment and other capital facilities. Sustaining capital costs do not
include costs of expanding the project that would result in improved
productivity of the existing asset, increased existing capacity or extended
useful life.
Sustaining exploration and development costs include expenditures incurred to
sustain current operations and to replace reserves and/or resources extracted
? as part of the ongoing production. Exploration activity performed near-mine
(brownfield) or new exploration projects (greenfield) are classified as non-sustaining.
The sum of all-in sustaining costs is divided by the corresponding gold equivalent ounces sold to determine a per ounce amount.
Costs excluded from cash costs and all-in sustaining costs, in addition to
depreciation and depletion, are income and mining tax expense, all corporate
financing charges, costs related to business combinations, asset acquisitions
and asset disposal, impairment charges and any items that are deducted for the
purpose of normalizing items.
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The following tables reconcile these non-GAAP measures to the most directly comparable GAAP measure, production costs applicable to sales; theEl Gallo project results are excluded from this reconciliation as the economics of residual leaching operations are measured by incremental revenue exceeding incremental costs. Incremental residual leaching costs for the three and six months endedJune 30, 2020 were$2.4 million or$1,262 per gold equivalent ounce sold and$5.2 million or$1,124 per gold equivalent ounce sold, respectively, compared to$2.8 million or$412 and$5.6 million or$506 per gold equivalent ounce sold in the same periods of 2019. Three months ended June 30, 2020 Six months ended June 30, 2020 Gold Bar Black Fox Total Gold Bar Black Fox Total (in thousands, except per ounce) (in thousands, except per ounce) Production costs applicable to sales - Cash costs (100% owned)$ 11,039 $ 8,150 $ 19,189 $ 28,071 $ 15,357 $ 43,428 Mine site reclamation, accretion and amortization 156 99 255
507 194 701
Inmine exploration 841 191 1,032 841 617 1,458
Capitalized underground
mine development
(sustaining) - - - - 3,646 3,646
Capital expenditures on
plant and equipment
(sustaining) 2,798 211 3,009 4,588 261 4,849
Sustaining leases 502 49 551 978 144 1,122
Allin sustaining costs $ 15,336 $ 8,700 $ 24,036 $ 34,985 $ 20,219 $ 55,204
Ounces sold, including
stream (Au Eq. oz)(1) 6.2 2.6 8.8 15.3 11.2 26.5
Cash cost per ounce ($/Au
Eq. oz sold) $ 1,772 $ 3,121 $ 2,170 $ 1,840 $ 1,369 $ 1,641
AISC per ounce ($/Au Eq.
oz sold) $ 2,462 $ 3,332 $ 2,719 Total gold equivalent ounces sold for Q2/20 and H1/20 is 10,800 and 31,100,
respectively, and includes gold equivalent ounces sold from the operating (1) mines of 8,800 and 26,500, as disclosed above, and 1,900 and 4,600 gold
equivalent ounces sold from the El Gallo Project for Q2/20 and H1/20,
respectively.
Three months ended June 30, 2019 Six months ended
Gold Bar Black Fox Total Gold Bar Black Fox Total
(in thousands, except per ounce) (in thousands, except per ounce)
Production costs applicable
to sales - Cash costs (100%
owned) $ 7,835 $ 10,639 $ 18,474 $ 8,643 $ 16,475 $ 25,118
Mine site reclamation,
accretion and amortization 283 163 446 374 320 694
Inmine exploration - 900 900 - 2,475 2,475
Capitalized underground
mine development
(sustaining) - 2,333 2,333 - 5,575 5,575
Capital expenditures on
plant and equipment
(sustaining) 870 1,038 1,908 870 1,140 2,010
Sustaining leases 478 119 597 934 173 1,107
Allin sustaining costs $ 9,466 $ 15,192 $ 24,658 $ 10,821 $ 26,158 $ 36,979
Ounces sold, including
stream (Au Eq. oz)(1) 8.7 12.7 21.4 9.4 20.0 29.3
Cash cost per ounce ($/Au
Eq. oz sold) $ 901 $ 837 $ 863 $ 924 $ 826 $ 857
AISC per ounce ($/Au Eq. oz
sold) $ 1,088 $ 1,196 $ 1,152 $
1,157
Total gold equivalent ounces sold for Q2/19 and H1/19 is 28,100 and 40,500,
respectively, and includes gold equivalent ounces sold from the operating (1) mines of 21,400 and 29,300, as disclosed above, and 6,700 and 11,200 gold
equivalent ounces sold from the El Gallo Project for Q2/19 and H1/19,
respectively.
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Three months ended June 30, Six months ended June 30,
2020 2019 2020 2019
San José mine cash costs (100%
basis) (in thousands, except per ounce)
Production costs applicable to sales
- Cash costs $ 30,402 $ 46,514 $ 58,718 $ 76,047
Mine site reclamation, accretion and
amortization 111 282 246 559
Site exploration expenses 917 2,553 3,783 5,891
Capitalized underground mine
development (sustaining) 2,674 6,376 9,119 11,911
Less: Depreciation (344) (571) (687) (1,060)
Capital expenditures (sustaining) 1,287 3,323 3,478 9,086
Allin sustaining costs $ 35,047 $ 58,477 $ 74,657 $ 102,434
Ounces sold (Au Eq. oz) 23.8 48.5 48.6 87.9
Cash cost per ounce ($/Au Eq. oz
sold) $ 1,280 $ 960 $ 1,207 $ 865
AISC per ounce ($/Au Eq. oz sold) $ 1,476 $ 1,207 $ 1,535 $ 1,165 Average realized price The term average realized price per ounce used in this report is also a non-GAAP financial measure. We prepare this measure to evaluate our performance against market (LondonP.M. Fix ). Average realized price is calculated as gross sales of gold and silver, less streaming revenue, divided by the number of net ounces sold in the period, less ounces sold under the streaming agreement. The following table reconciles the average realized prices to the most directly comparableU.S. GAAP measure, revenue from gold and silver sales. Ounces of gold and silver sold for the San José mine are provided to us by MSC. Three months ended June 30, Six months ended June 30, 2020 2019 2020 2019
Average realized price - 100% owned (in thousands, except per ounce) Revenue from gold and silver sales$ 18,291 $ 36,383 $ 49,691 $ 51,966 Less: revenue from gold sales, stream 179 499 681 851 Revenue from gold and silver sales, excluding stream$ 18,112 $ 35,884 $ 49,010 $ 51,115 Gold equivalent ounces sold 10.8 28.1 31.1 40.5 Less: gold ounces sold, stream 0.3 0.9 1.2 1.6 Gold equivalent ounces sold, excluding stream 10.5 27.2 29.9 38.9 Average realized price per Au Eq. oz sold, excluding stream$ 1,733 $ 1,318 $ 1,641 $ 1,313 Three months ended June 30, Six months ended June 30, 2020 2019 2020 2019 Average realized price - San José mine (100% basis) (in thousands, except per ounce) Gold sales$ 28,499 $ 39,215 $ 53,337 $ 66,525 Silver sales 18,582 26,782 31,134 48,293 Gold and silver sales$ 47,081 $ 65,997 $ 84,471 $ 114,818 Gold ounces sold 15.1 28.2 29.7 48.9 Silver ounces sold 904.4 1,784.8 1,867.6 3,189.5 Gold equivalent ounces sold 23.8 48.5 48.6 87.9 Average realized price per gold ounce sold$ 1,893 $ 1,392$ 1,796 $ 1,361 Average realized price per silver ounce sold$ 20.55 $ 15.01$ 16.67 $ 15.14 Average realized price per gold equivalent ounce sold$ 1,982 $ 1,362$ 1,737 $ 1,306 39 Table of Contents Liquid assets
The term liquid assets is also a non-GAAP financial measure. We report this measure to better understand our liquidity in each reporting period.
Liquid assets is calculated as the sum of the Balance Sheet line items of cash and cash equivalents, restricted cash and investments, plus ounces of doré held in precious metals inventories valued at the London PM Fix spot price at the corresponding period. The following table summarizes the calculation of liquid assets as atJune 30, 2020 and 2019: June 30, 2020 2019 (in thousands) Cash and cash equivalents$ 18,410 $ 9,325 Restricted cash - 13,112 Investments - 5,147 Trade receivables 882 -
Receivables from marketable securities sales 960 1,294
$ 20,844 $ 31,769
As at
(2) Precious metals valued at cost, inclusive of ounces to be delivered to
Sandstorm, equals $739 and $2,404 , respectively.
CRITICAL ACCOUNTING POLICIES
Critical accounting policies and estimates used to prepare our financial statements are discussed with our Audit Committee as they are implemented and on an annual basis.
The were no significant changes in our Critical Accounting Policies since
FORWARD-LOOKING STATEMENTS This report contains or incorporates by reference "forward-looking statements", as that term is used in federal securities laws, about our financial condition, results of operations and business. These statements include, among others:
statements about our anticipated exploration results, costs and feasibility of
? production, production estimates, receipt of permits or other regulatory or
government approvals and plans for the development of our properties;
? statements regarding the potential impacts of the COVID-19 pandemic, government
responses to the continuing pandemic, and our response to those issues;
statements concerning the benefits or outcomes that we expect will result from
? our business activities and certain transactions that we contemplate or have
completed, such as receipt of proceeds, increased revenues, decreased expenses
and avoided expenses and expenditures; and
? statements of our expectations, beliefs, future plans and strategies,
anticipated developments and other matters that are not historical facts.
These statements may be made expressly in this document or may be incorporated by reference to other documents that we will file with theSEC . Many of these statements can be found by looking for words such as "believes", "expects", "anticipates", "estimates" or similar expressions used in this report or incorporated by reference in this report. 40
Table of Contents
Forward-looking statements and information are based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties, risks and contingencies, and there can be no assurance that such statements and information will prove to be accurate. Therefore, actual results and future events could differ materially from those anticipated in such statements and information. We caution you not to put undue reliance on these forward-looking statements, which speak only as of the date of this report. Further, the information contained in this document or incorporated herein by reference is a statement of our present intention and is based on present facts and assumptions, and may change at any time and without notice, based on changes in such facts or assumptions. Readers should not place undue reliance on forward-looking statements.
Risk Factors Impacting Forward-Looking Statements
Important factors that could prevent us from achieving our stated goals and
objectives include, but are not limited to, those set forth in the "Risk
Factors" section in our report on Form 10-K and other reports filed with the
? our ability to raise funds required for the execution of our business strategy;
the effects of pandemics such as COVID-19 on health in our operating
? jurisdictions and the world-wide, national, state and local responses to such
pandemics;
? our ability to secure permits or other regulatory and government approvals
needed to operate, develop or explore our mineral properties and projects;
? decisions of foreign countries, banks and courts within those countries;
? unexpected changes in business, economic, and political conditions;
? operating results of MSC;
? fluctuations in interest rates, inflation rates, currency exchange rates, or
commodity prices;
? timing and amount of mine production;
? our ability to retain and attract key personnel;
? technological changes in the mining industry;
? changes in operating, exploration or overhead costs;
? access and availability of materials, equipment, supplies, labor and
supervision, power and water;
? results of current and future exploration activities;
results of pending and future feasibility studies or the expansion or
? commencement of mining operations without feasibility studies having been
completed;
? changes in our business strategy;
? interpretation of drill hole results and the geology, grade and continuity of
mineralization;
? the uncertainty of reserve estimates and timing of development expenditures;
? litigation or regulatory investigations and procedures affecting us;
? changes in federal, state, provincial and local laws and regulations;
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? local and community impacts and issues including criminal activity and violent
crimes;
? accidents, public health issues, and labor disputes;
? our continued listing on a public exchange;
? uncertainty relating to title to mineral properties; and
? changes in relationships with the local communities in the areas in which we
operate.
We undertake no responsibility or obligation to update publicly these forward-looking statements, except as required by law and may update these statements in the future in written or oral statements. Investors should take note of any future statements made by or on our behalf.
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