Tahoe Resources Reports Record Results In Q1 2017
VANCOUVER, May 2, 2017 /CNW/ -- Tahoe Resources Inc. ("Tahoe" or the "Company") (TSX: THO, NYSE: TAHO) today announced financial and operating results for the first quarter of 2017 ("Q1 2017"), including strong production and cost results from both silver and gold operations, record quarterly cash flow and earnings and continued progress advancing key development projects. The Company's balance sheet remained strong, with cash and cash equivalents of $175.4 million at March 31, 2017.
Highlights of results for Q1 2017 are provided below.
Another excellent quarter at Escobal – Tahoe reported total silver production in Q1 2017 of 5.7 million ounces driven by strong results at Escobal. Q1 2017 silver production was 17% higher than the previous quarter and the highest quarterly production since Q1 2016 (5.7 million ounces). Total cash costs and all-in sustaining costs ("AISC") were $5.72 and $8.11 per ounce of silver produced, net of byproduct credits, respectively, better than the $6.48 and $9.76 per ounce recorded in Q4 2016 and well below the full-year target ranges included in the Company's 2017 guidance.
Strong results from all three gold operations – Q1 2017 gold production totaled 119.1 thousand ounces, compared to record production of 119.9 thousand ounces in Q4 2016. Production and costs in Q1 2017 reflected strong results at all of the Company's mines, as well as a one-time addition of 9.0 thousand ounces related to a change at La Arena and Shahuindo to report production as ounces recovered versus ounces poured. The reporting change had no impact on gold sales. Total cash costs and AISC averaged $574 and $860 per ounce in Q1 2017, which compared to $594 and $945, respectively, in the previous quarter. Excluding the impact of the change, total cash costs and AISC in Q1 2017 were $623 and $933 per ounce, well below the target ranges included in full-year 2017 guidance.
Record earnings and cash flow per share driven by record revenue and low costs – Q1 2017 cash flow provided by operating activities before changes in working capital was a record $132.9 million or $0.43 per share, and represented increases of 78% and 79%, respectively, from the previous quarter. Earnings and adjusted earnings in Q1 2017 were a record $74.7 million and $75.1 million, respectively, and were both $0.24 on a per share basis. The results compared to earnings of $0.3 million or $0.00 per share and adjusted earnings of $18.4 million or $0.06 per share in Q4 2016. Record cash flow and earnings largely resulted from a 33% increase in revenues compared to Q4 2016, to a record $251.0 million in Q1 2017. The increase in revenues reflected record gold sales of 115.9 thousand ounces, as well as increases in silver sales and the realized price for silver of 24% and 33%, respectively, from Q4 2016 levels.
Growth plans remain on track – Capital expenditures in Q1 2017 totaled $48.6 million, of which $33.1 million was for sustaining capital expenditures and $15.5 million was related to project capital. Exploration expenditures in Q1 2017 totaled $4.2 million. Capital and exploration expenditures were lower in the first quarter than the expected average for the year due to the lag time between ordering, completions and the normal billing cycle, the schedule for receipt of permits and commencing work programs and the impact of minor delays due to heavy rains at Shahuindo. Expenditure levels are expected to increase over the balance of 2017 as the Company works towards completing expansion projects at Shahuindo and the Bell Creek mine in mid-2018 and undertakes exploration programs at a number of high-potential targets.
Industry-leading dividend – $18.7 million was paid in dividends to shareholders in Q1 2017, including $3.9 million in share-based dividends.
Ron Clayton, President and CEO of Tahoe, commented: "We are off to a great start in 2017, with record cash flow per share as well as earnings and adjusted earnings in the first quarter largely driven by strong operating results at all of our mines. Total silver production was 5.7 million ounces for the quarter with per ounce costs averaging well below our target ranges for the year. Turning to gold, we were very pleased with the results from all of our gold mines, with each operation's production and costs coming in at, or better than, expected levels. Equally important, at quarter end we remained well positioned to achieve our growth targets, including producing at least a half million ounces of gold in 2019 at AISC averaging below $1,000 per ounce.
"Looking at the remainder of 2017, our full-year 2017 production and cost guidance for both silver and gold remains unchanged as production and per ounce costs are expected to be more in line with target levels over the balance of the year. The pace of both capital and exploration expenditures has increased on schedule in the second quarter as we move towards completing the initial circuit of our crushing and agglomeration plant at Shahuindo in the second half of this year and advance work to expand Shahuindo to 36,000 tonnes per day and Bell Creek mine to 80,000 ounces per year by late 2018."
Performance Against 2017 Guidance
In Q1 2017, the Company performed well against all of its 2017 guidance. The table below provides Tahoe's 2017 guidance as well as the related Q1 2017 performance. For a review of performance against each operations's guidance, see the Review of Operations section later in this press release.
|$ millions unless otherwise indicated||2017 Guidance||Q1 Performance|
|Silver production (moz)||18-21||5.7|
|Gold production (koz)(2)||375-425||119.1|
|Total cash cost per silver oz produced ($/oz)(3)(4)(5)(6)(7)||$7.00-$8.00||$5.72|
|AISC per silver oz produced ($/oz)(2)(3)(4)(5)(6)(7)||$9.50-$10.50||$8.11|
|Total cash cost per gold oz produced ($/oz)(4)(7)||$700-$750||$574|
|AISC per gold oz produced ($/oz)(4)(7)||$1,150-$1,250||$860|
|Sustaining capital (incl. capitalized drilling)||$160-$175||$33.1|
|(1)||See "Forward-Looking Statements" and "Cautionary Note on Non-GAAP Financial Measures" at the end of this press release.|
|(2)||Gold production range of 375 to 425 thousand ounces includes gold ounces produced in concentrate from the Escobal mine.|
|(3)||Assumes the following metals prices: $1,250/oz gold; $0.90/pound lead; $0.90/pound zinc.|
|(4)||Total cash costs and AISC are presented net of by-product credits.|
|(5)||Assumes payable by-product metal production: 10,190 oz gold; 16,332 thousand pounds lead; 23,109 thousand pounds zinc.|
|(6)||Silver cost guidance assumes a 1% statutory royalty and a 4.5% voluntary and private royalty on all silver sales above $16/oz.|
|(7)||All per ounce costs are based on silver ounces contained in concentrates (silver) and gold ounces produced.|
|(8)||Corporate G&A includes non-cash, stock-based compensation.|
|(9)||Numbers may not add due to rounding.|
Cost guidance for 2017 was calculated based on certain commodity and currency assumptions. The table below includes a calculation of the impact of an increase or decrease in these assumptions on total cash costs and AISC:
|2017 Guidance||Change (+/-)||Impact (+/-)|
|Gold ($/oz)||$1,250||$100/oz||$0.05/oz silver|
|Lead ($/lb)||$0.90||10%||$0.10/oz silver|
|Zinc ($/lb)||$0.90||10%||$0.10/oz silver|
|Diesel (US$/gal)||$2.00||10%||$0.10/oz silver|
|Guatemalan quetzal/USD||7.65||1%||$0.02/oz silver|
|Peruvian sol/USD||3.4||1%||$2/oz gold|
REVIEW OF OPERATIONS
|$ millions unless otherwise indicated||2017 Guidance||Q1/17||Q4/16||Q1/16|
|Silver Production (moz)||18-21||5.6||4.8||5.7|
|Total cash cost per silver oz ($/oz)||$7.00-$8.00||$5.72||$6.48||$4.51|
|AISC per silver oz produced ($/oz)||$9.50-$10.50||$8.11||$9.76||$5.97|
Mill throughput averaged 4,332 tonnes per day ("tpd") during Q1 2017. The mill processed a total of 0.4 million tonnes at an average silver head grade of 520 grams per tonne ("g/t") with an average silver recovery of 86% during the quarter. The mine produced metal concentrates containing 5.6 million payable ounces of silver, 2,500 ounces of gold, 2,200 tonnes of lead and 3,200 tonnes of zinc in Q1 2017. Silver production for the quarter compared favourably to full-year 2017 guidance and was 17% higher than the previous quarter and largely in line with Q1 2016 levels.
A total of 5.5 million ounces of silver in concentrate were sold in Q1 2017, which was approximately one million ounces more than was sold in Q4 2016 and Q1 2016. Concentrate sales during the quarter generated $113.1 million in revenues at mine operating costs of $53.5 million resulting in mine operating earnings of $59.6 million.
Total cash costs net of by-product credits for Q1 2017 were $5.72 per ounce, while AISC were $8.11 per ounce. Per ounce silver costs averaged below the target ranges included in the Company's full-year 2017 guidance and improved from Q4/16. Total cash costs in Q1 2017 were $1.21 per ounce or 27% higher than in Q1 2016, while AISC increased by $2.14 per ounce or 36% from the same quarter a year earlier. The increase in total cash costs and AISC was primarily the result of an additional $5.3 million in royalty expense during Q1 2017 as a result of the finalization of sales above the $16.00 per ounce threshold when compared to Q1 2016. AISC were also impacted by a $5.8 million increase in sustaining capital.
Sustaining capital expenditures in Q1 2017 totaled $9.9 million, which compared to $10.3 million in Q4 2016 and $4.1 million in Q1 2016. Work continued during Q1 2017 on a program to dewater future underground production areas. A series of dewatering wells are being collared on the 1190 sublevel, currently the lowest production level, to dewater compartmentalized water-bearing zones in advance of primary ramp development to access the lower half of the Central Zone. The first two wells have been completed and are producing approximately 160 gallons per minute as hydrogeologic modeling predicted. The third and fourth wells of the series are in progress and nearing completion.
The first component of the newly constructed primary underground pump station, designed to handle clean water pumped from the underground dewatering wells, was commissioned in March 2017. The second component of the pump station, which will handle water impacted by mining operations, is scheduled for completion in Q2 2017. The pump station design and piping scheme maintains separation of clean water from impacted water to minimize the need for water treatment prior to discharge and to provide additional clean make-up water for operations as needed.
Underground ramp, sublevel and stope development continued to advance in support of the life-of-mine production schedule, with approximately 2,500 metres of development and 36,000 metres of longhole production drilling completed in Q1 2017.
Project capital expenditures in Q1 2017 totaled $nil, a $0.6 million decrease from the previous quarter and a reduction from $1.1 million in Q1 2016 when the mine completed construction of a new paste fill plant.
|$ millions unless otherwise indicated||2017 Guidance||Q1/17||Q4/16||Q1/16|
|Gold production (koz)||145-155||53.0||58.4||46.6|
|Total cash cost per gold oz ($/oz)||$750-$800||$513||$516||$638|
|AISC per gold oz produced ($/oz)||$1,000-$1,100||$683||$786||$825|
Production in Q1 2017 totaled 3.4 million tonnes of ore sent to the leach pad at an average gold grade of 0.53 g/t containing 57.9 thousand gold ounces. A total of 53.0 thousand ounces of gold were produced during Q1 2017 at an average gold recovery rate of approximately 86%. Of the 53.0 thousand ounces produced in Q1 2017, 6.6 thousand ounces related to the one-time impact from the initial recognition of gold in carbon in production. Q1 2017 production compared to production of 58.4 thousand ounces in Q4 2016 when a total of 4.5 million tonnes of ore was sent to leach pads, and 46.6 thousand ounces in Q1 2016.
Q1 2017 gold sales totaled 48.9 thousand ounces, which compared to sales of 53.0 thousand ounces in Q4 2016 and 46.1 thousand ounces in Q1 2016. Gold sales in Q1 2017 generated $59.0 million in revenues at mine operating costs of $31.6 million resulting in mine operating earnings of $27.5 million.
Total cash costs net of by-product credits for Q1 2017 were $513 per ounce, while AISC were $683 per ounce. Excluding the impact of the change to report production based on ounces recovered, total cash costs for the quarter averaged $586 per ounce, while AISC averaged $781 per ounce, with both measures being well below the target ranges included in full-year 2017 guidance.
Sustaining capital expenditures in Q1 2017 totaled $5.9 million, which compared to $13.6 million in Q4 2016, when significant leach pad and waste dump extension work was completed, and $4.6 million in Q1 2016. Sustaining capital expenditures in Q1 2017 mainly related to the continued extensions of leach pad and waste dumps.
|$ millions unless otherwise indicated||2017 Guidance||Q1/17||Q4/16|
|Gold production (koz)||65-85||19.7||13.8|
|Total cash cost per gold oz ($/oz)||$750-$800||$582||$989|
|AISC per gold oz produced ($/oz)||$1,600-$1,700||$870||$1,513|
Commercial production commenced at Shahuindo effective May 1, 2016. Production from the Shahuindo pit in Q1 2017 totaled 1.4 million tonnes of ore at an average strip ratio of 0.80. A total of 1.0 million tonnes at an average gold grade of 0.64 g/t containing 20.3 thousand gold ounces were placed on the leach pads during Q1 2017. During Q1 2017, production at Shahuindo totaled 19.7 thousand ounces of gold (including 2.4 thousand ounces related to the change to record production based on ounces recovered). Contributing to a 5.9 thousand ounces increase in production compared to the previous quarter was 43% more tonnes being placed on the pads, which was only partially offset by a lower average grade (0.89 g/t in Q4 2016 versus 0.64 g/t in Q1 2017).
At total of 15.7 thousand ounces of gold in doré were sold in Q1 2017, which compared to 12.9 thousand ounces the previous quarter. Q1 2017 gold sales generated $19.4 million in revenues at mine operating costs of $17.4 million resulting in mine operating earnings of $2.1 million.
Total cash costs and AISC for Q1 2017 were $582 and $870 per ounce, respectively ($664 and $992 per ounce after the impact of the change in production reporting), well below the target ranges included in the Company's 2017 guidance and significantly lower than the comparable levels in Q4 2016. The reduction in total cash costs was mainly due to higher volumes in Q1 2017, with lower AISC also resulting from reduced sustaining capital expenditure levels.
Sustaining capital expenditures in Q1 2017 totaled $2.7 million compared to $2.3 million in Q4 2016. The construction of the major storm events pond was completed in January 2017 with a total capacity of 45,000 cubic metres. Additionally, two settling ponds of 15,000 cubic metres each were constructed to minimize the suspended solids and to increase the current water storage capacity.
The construction of the base platform and preparation of the foundation for the South waste rock dump was completed during Q1 2017 for use beginning in April 2017. The South waste rock dump has sufficient capacity to accommodate waste rock material mined from the Shahuindo pit through Q4 2018.
Project capital expenditures in Q1 2017 totaled $5.7 million, which compared to $9.2 million in Q4 2016. The $5.7 million of project expenditures in Q1 2017 related to the initial 12,000 tpd crushing and agglomeration circuit. The Company completed the permitting process and began construction of the Phase I plant during the quarter. Approximately $20.0 million of the $80 million total project budget for the crushing and agglomeration plant had been spent to March 31, 2017. Of the remaining amount, the Company has $13.0 million in commitments with the balance expected to be incurred from Q2 2017 through Q3 2018. Based on the timing of scheduled construction activities associated with crushing and agglomeration and leach pads, the timing of the permits that have been received and minor delays due to heavy rains during Q1 2017, capital expenditures are expected to be higher over the next seven quarters as compared to Q1 2017. The project remains on schedule and budget to achieve the full 36,000 tonne per day production rate in the second half of 2018, providing an expected 80% ultimate gold recovery, in line with the pre-feasibility study.
|$ millions unless otherwise indicated||2017 Guidance||Q1/17||Q4/16|
|Gold production (koz)||165-185||43.9||45.3|
|Total cash cost per gold oz ($/oz)||$650-$700||$645||$575|
|AISC per gold oz produced ($/oz)||$1,000-$1,100||$1,070||$976|
The Company's Timmins mines consist of two mining operations, Bell Creek and Timmins West, both of which feed the Bell Creek Mill. These assets were acquired on April 1, 2016. During Q1 2017, 0.3 million tonnes (3,521 tpd) were processed with an average gold feed grade of 4.46 g/t and a process recovery rate averaging 97%. A total of 43.9 thousand gold ounces were recovered during Q1 2017, which compared to 45.3 thousand ounces in Q4 2016, the highest quarterly production since the acquisition of the Timmins mines.
A total of 49.4 thousand ounces of gold in doré were sold in Q1 2017. Gold sales during the quarter generated $59.5 million in revenues at mine operating costs of $44.4 million resulting in mine operating earnings of $15.0 million.
Total cash costs and AISC for Q1 2017 were $645 and $1,070 per ounce, respectively. AISC was impacted by on-going capitalized ramp and sub-level development advancements during the quarter.
Sustaining capital expenditures in Q1 2017 totaled $14.6 million similar to the $15.7 million recorded in Q4 2016. During Q1 2017, underground ramp and sublevel development at both Timmins West and Bell Creek continued in support of the life-of-mine production schedules, with 5,364 metres of total development completed during the quarter. At Timmins West, infrastructure development at the 144 Gap deposit advanced, including ramp, raise and lateral development to access the resource. Underground infill and definition drilling completed at both mines in Q1 2017 to improve resource/reserve definition totaled 51,129 metres.
Project capital expenditures in Q1 2017 totaled $9.8 million compared to $9.3 million in Q4 2016. Of this amount, $8.8 million related to the Bell Creek Shaft Project. Lateral development for the Bell Creek Shaft Project on four of five horizons was completed during Q1 2017. The focus of work has now shifted to the 1040 metre level and reaching shaft bottom in order to commence the last section of the vertical development. Vertical development progressed well during Q1 2017. The benching of the raise from the 300 metre level to the 535 metre level commenced as well as the raise from the 790 metre level up towards the 535 metre level using the mechanized raise climbing method. Shaft rehabilitation work also progressed well in Q1 2017. Construction started on the internal sinking plant on the 240 metre horizon. Engineering and procurement continued on schedule with all permanent material available on plan. Surface infrastructure work continued in the quarter with the new administration complex progressing well.
Of the $80 million total budget for the Bell Creek Shaft Project, approximately $18.9 million had been spent to March 31, 2017. Of the remaining amount, the Company had $12.7 million in commitments with the balance expected to be spent in 2017 and 2018. The project remains on schedule and budget.
Exploration expenditures in Q1 2017 totaled $4.2 million. Of this amount, $2.5 million was incurred in Canada, where a total of 31,666 metres of drilling was completed. Close to half of total metres were drilled at the Fenn-Gib project, where the Company is targeting the release of a Preliminary Economic Assessment before the end of 2017. Other areas of focus for exploration drilling during the quarter included: continued testing of the down-plunge extension of the Timmins Deposit Fold Nose at Timmins West Mine; drilling along a potential new mineralized trend identified at the 144 South zone on the 144 Trend; drilling along strike at Bell Creek and to test depth extensions at the Schumacher and Vogel properties to the east of Bell Creek; and drilling at Whitney to test both shallow open-pit and deep underground targets.
Exploration expenditures in Peru in Q1 2017 totaled $1.4 million. Exploration work at Shahuindo during the quarter focused on step-out drilling to define the margins of the current resource and identify new zones outside of the current planned pit. This drilling was focused on the San Jose and the La Chilca zones on the extreme northwest margin of the Shahuindo resource and the Pampa Arenas zone east of the current starter pit. Recent drilling at La Chilca has confirmed mineralization 400 metres northwest of the current Shahuindo pit limit. Drilling in the San Jose zone added definition to the existing geologic model.
In addition, reconnaissance work continued during Q1 2017 in areas north and northwest of Shahuindo to identify additional early-stage district targets. Trenching in the Tabacos, Alisos and Azules zones 1.2 to 1.5kms north of Shahuindo exposed wide zones of mineralization within oxidized sandstone host rocks. The north zone has received little to no prior drilling and offers the potential to significantly influence the Shahuindo resource and mine plan. Drilling at these early-stage exploration targets is planned as permits are received in 2017.
No drilling was carried out during Q1 2017 at La Arena. Planning continued for extensional and metallurgical drilling at the Phase II project, which is expected to commence in Q2 2017.
Exploration expenditures in Guatemala in Q1 2017 totaled $0.3 million and mainly related to continued drilling between the Central and East Escobal zones.
Tahoe's senior management will host a conference call and webcast to discuss the Q1 2017 results on Wednesday, May 3, 2017 10:00 a.m. ET (7:00 a.m. PT). To join the call please dial 1-800-319-4610 (toll free from Canada and the U.S.) or +1-604-638-5340 (from outside Canada and the U.S.). The webcast will be available on the Company's website at www.tahoeresources.com, as will a recording of the call later in the day.
About Tahoe Resources Inc.
Tahoe's strategy is to responsibly operate mines to world standards, to pay significant shareholder dividends and to develop high quality precious metals assets in the Americas. Tahoe is a member of the S&P/TSX Composite and TSX Global Mining indices and the Russell 3000 on the NYSE. The Company is listed on the TSX as THO and on the NYSE as TAHO.
Qualified Person Statement
Technical information in this press release has been approved by Charlie Muerhoff, Vice President Technical Services, Tahoe Resources Inc., a Qualified Person as defined by NI 43-101.