Earnings Transcript for NCM.AX - Q1 Fiscal Year 2021

Operator: Thank you for joining us this morning. Welcome to the Pretium Resources First Quarter 2021 Conference Call. [Operator Instructions]. The conference call today is being webcast live and available along with the presentation slides on Pretium's website at pretivm.com. I would now like to turn the call over to Mr. Jacques Perron, Pretium's President and CEO. Please go ahead.

Jacques Perron: Thank you. Good morning, everyone. Welcome to our first quarter 2021 operating and financial results conference call. The first quarter of 2021 has proven to be very challenging. But thanks to the dedication of our team, the support of our contractors, the contributions of our First Nation community partners, our health care provider, Iridia Medical and BC Northern Health, operations continued throughout the COVID outbreak, and we delivered a solid performance under the circumstances. On today's call, I will briefly touch on some of the key events of the first quarter. I will then turn the call over to Patrick Godin, our Chief Operating Officer, to provide an overview of our production results and the progress of operations. Following that, Matthew Quinlan, our Chief Financial Officer, will go over some of the financial highlights of the quarter. Following the quarterly review, I will provide a summary of the recently announced underground expansion drilling results before closing off with a look ahead to the remainder of the year. At the end of the presentation, we will open the call to your questions. Before we begin, note that our statements contain forward-looking information and future-oriented financial information based on certain assumptions and subject to risk factors. I refer you to the cautionary language included in our news release of yesterday as well as the management's discussion and analysis for the same periods. These are available on our website and have been filed on SEDAR. Please note, all dollar amounts mentioned on this call are in U.S. dollars unless otherwise noted. The health and safety of our workforce remains our #1 priority. Last year, we launched an extensive company-wide health and safety plan to transform our safety culture. Here on the fourth slide, you can see our rolling 12-month lost time injury frequency rate and our total recordable injury rate, which is starting to trend in the right direction. There is still room for improvement, and it will be an ongoing process as we continue to focus our efforts to emphasize the importance of safety and ensure it is at the forefront of everything we do. Despite the obstacle we faced in the first quarter, we were able to maintain operations and produce almost 86,000 ounces of gold. It was yet another profitable quarter and we generated nearly $51 million in free cash flow. We ended the quarter with a cash balance of nearly $209 million and subsequent to the end of the quarter, we repaid the remaining $38 million on the revolving portion of the loan facility. We had several major initiatives underway such as accelerating underground development, infill drilling and increasing drilled up stope inventory with the intent to improve operations at Brucejack. We're also making significant investments in future growth, which includes construction of upgraded camp facilities, an assay lab and integrated core shack, along with resource expansion and near mine exploration drill programs. As most of you are aware, a COVID outbreak was declared at Brucejack during the first quarter. We have been lucky enough to make it through 2020 with 0 cases of COVID at Brucejack. But with the rising number of cases in BC and Canada, it unfortunately finally got to site. On February 10, BC Northern Health declared a COVID-19 outbreak at the Brucejack Mine. To protect the health and safety of our workforce and local communities, we quickly implemented our management plan, which included enhanced protocols such as restricting travel while site-wide testing could be completed. In collaboration with our local indigenous partners and BC Northern Health, additional procedures were established, including ongoing testing of all employees and contractors. As a result of this cooperation and the quick response of our team, the COVID outbreak was declared over on March 21, with no new cases reported. Following the outbreak, a vaccination program was launched at Brucejack under the guidance of BC Northern Health. Although mine and mill production continued throughout the quarter, the outbreak -- during the outbreak, it was at a reduced rate. We will continue to closely monitor the situation and provide updates as appropriate. This is a reminder that COVID-19 remains a risk and could have a significant impact over a short period of time. I will now turn the call over to Patrick to provide an overview of our operations for the first quarter of 2021.

Patrick Godin: Thanks, Jacques. Turning to operations on Slide 8. In the first quarter, we processed approximately 341,000 tonnes of ore through the mill, equivalent to 3,790 tonnes per day. This is slightly below our objective of 3,800 tonnes per day as a result of the COVID outbreak. Disposition costs for the first quarter averaged $198 per tonne milled, an increase from the first quarter last year. The cost increase due to the strengthening Canadian dollar and the extra costs associated with the COVID safety protocol. The change in the exchange rate increased production cost by about $16 per tonne and the COVID safety protocol results in a nutshell, $8 per tonne milled. Partially offsetting this was approximately $4 per tonne of lower costs due to the lower levels of production drilling as well as lower blasting and ground support costs. Turning to Slide 9. As you can see, our quarterly rate of underground development has historically been trending up quarter-over-quarter. In the first quarter of last year, the onset of the COVID pandemic stalled our momentum. And then in the first quarter of this year, our rate of development was impacted by the COVID outbreak. Although we achieved a targeted rate of 1,000 meters per month, this was lower than our anticipated performance. We will be increasing our efforts to push on development to get back on track with our plan -- with our 2021 plan. Despite the challenge we faced this quarter, we still produced nearly 86,000 ounces of gold, which is less than 1% below the guidance range midpoint for this year. The mill feed grade averaged 8.2 grams per tonne and the recovery rate was at 96.8%. As a result of the impacts of the COVID-19 outbreak on operational activities, combined with performance issues with several stopes during -- following the outbreak, we currently expect -- we currently expect gold production and grade in the second quarter to be below our guidance range on an annual basis. But based on our production forecast, we remain on track to be within our full year production guidance range. To enhance our understanding of the high-grade variable deposit and improve the predictability of production, we have increased the density of drill data we collect. Diamond drilling progressed through the quarter with 6 diamond drills on site conducting infield and resource expansion drilling. The rate of drilling was reduced during the COVID outbreak, but we still complete more than 39,000 meters of diamond drilling. We are adding a seventh drill on the ground to catch up on our plan for the year. To optimize production and improve blending to balance quarter-to-quarter fluctuation, we have maintained an accelerated rate of underground development to improve underground access. The increased development rate expand our access to new areas of the deposit and provides the space to build an inventory of drilled off stope. Our target is to have about 400,000 tonnes of drilled stope ready to be blasted by the end of the third quarter of 2021. This is roughly equivalent to a full quarter of production. At the end of the first quarter, we had 276,000 tonnes of drilled-off stope. Inventory increases at 23% increase from the previous quarter. Turning now to Slide 13, we have a section view of the underground development looking north. Until this year, mining had been limited to only 2 mining horizons at Brucejack. And mining horizon consists of 4 mining level, each about 30 meters in height. Earlier this year, we began production from the lower horizon on the 1080 Level. We're now actively operating from 3 mining horizon. We are continuing to develop access into the Fault Zone, which is just west of the Brucejack Fault on 1200 the 1320 Levels. We expect to be mining from these 2 areas later this year. This will increase access from mining from -- to 5 from 3 distinct area and will provide significantly more flexibility in terms of production compared to previous year. Now I will turn the call over to Matt for an overview of our financial performance.

Matthew Quinlan: Thanks, Patrick. Our financial results were strong in the quarter. For the quarter, we realized an average gold price of $1,804 per ounce, an increase of 12% over the first quarter of 2020. Revenue increased to $142 million, a similar 12.5% increase compared to the first quarter of 2020 due to relatively consistent gold sales across both periods. In the first quarter of 2021, we sold approximately 82,000 ounces of gold. EBITDA in the quarter was $68.1 million as compared to $56.3 million in the first quarter of 2020. Net earnings and adjusted earnings were both $0.14 per share for the quarter, a significant increase over the $0.05 and $0.08 per share, respectively, in the first quarter of 2020. Net earnings increased primarily due to higher revenues, decreases in interest expense and deferred taxes, partially offset by increased production costs. We changed our definition of adjusted earnings per share effective this quarter, and all prior periods have been restated to reflect this new definition on Slide 16. We have simplified our definition to make it more comparable to our peers. And as a result, we're not adjusting for certain noncash items in the new definition, including deferred taxes and amortization of prior financing costs. Now the end result of this is that our revised definition lowered adjusted earnings per share by $0.08 in the first quarter when compared to the prior definition. I.e., under the prior definition, our adjusted earnings per share would have been $0.22 per share in the quarter as this page shows. Lastly, I note on the MD&A., we've completely reformatted and rewritten this document in the first quarter with the aim of giving you, our shareholders, an improved understanding of our business results and outlook. Turning to Slide 17, the year-over-year increase in EBITDA helped drive cash flow from operations to $61 million for the quarter, an increase of approximately 20% over the first quarter of last year. Operating cash flows reflect the increase in production costs for the reasons noted by Pat included the COVID-19 costs related to the ongoing prevention measures and the outbreak. Total capital expenditures in the quarter on a cash basis were $10.6 million. Free cash flow was $51 million, as noted by Jacques, for the quarter, nearly a 22% increase over the first quarter last year. Liquidity continued to grow in the quarter. We ended the quarter with approximately $209 million in cash and available liquidity of approximately $369 million. Debt as of March 31 comprised primarily of bank debt of approximately $155 million and convertible notes of $100 million. Subsequent to the end of the quarter, we voluntarily repaid the entire remaining amount of $38 million of bank debt on our revolver, leaving the $200 million revolving portion of our facility undrawn. Turning to Slide 18, all-in sustaining cash costs in the quarter of $1,005 were consistent with the comparative period in 2020. AISC for the fourth quarter of 2020 was also consistent at $1,009 per ounce. As Pat noted, production costs increased relative to Q1 2020 as a result of the strengthening Canadian dollar, COVID-19 costs, partly offset by lower development costs. More favorable terms under our offtake agreements contributed to a saving compared to the prior year. And as a result of the COVID outbreak in the quarter, levels of sustaining capitals were slightly lower than the prior year and most notably below our expectations. So as a result, the all-in sustaining cash cost per ounce sold in the quarter was below our guidance range for the year. That's something we don't expect to be the case for the balance of the year. So turning to Slide 19, we're reaffirming our guidance ranges for 2021, both operationally and financially. As previously mentioned, we expect gold production in the second quarter to be below our guidance range on an annualized basis. However, forecasted gold production and grade for the full year remains within guidance. We expect to be at the top end of our guidance range of $55 million to $65 million for expansion capital and at the low end of our $50 million to $55 million range for sustaining capital. Levels of capital expenditures noted here in the first quarter reflect the effects of COVID, but also, please remember that the second and third quarters typically see higher levels of capital expenditures due to the summer construction season at Brucejack. With that, back to you, Jacques.

Jacques Perron: Thanks, Matt. The 2020 regional exploration program on the company's claims included a promising discovery of epithermal style gold mineralization at the Hanging Glacier Zone. The 2021 near mine exploration program will focus on the Hanging Glacier Zone, which is easily accessible from Brucejack. A 10,000-meter surface drill program is planned for this summer to test the high-grade corridors. Additional near-mine exploration this year will focus on the trend of highly altered outcrop that extends 4 kilometers from the Hanging Glacier Zone to the northwest of Brucejack to the bridge zone to the Southeast. In addition to the exploration work, 8,000 meters of surface drilling is planned to test these zones surrounding Brucejack. This program is expected to start at the end of the second quarter. Through 2021, Brucejack definition and expansion drill program is anticipated to total approximately 195,000 meters of drilling comprised of reserve definition and resource expansion drilling. Underground resource expansion and exploration drilling will target near mine zones with the potential to extend mineralization underground. Initially, 6 drills were deployed underground, and as Patrick mentioned, a seventh has been added to catch up. During the summer, 2 surface drills will be added. In 2020, we completed about 28,000 meters of resource expansion drilling outside the resource shell to the north of the Valley of the Kings Zone. This is the first time resource expansion drilling was conducted at Brucejack since production started. Here, looking at Slide 23 is a cross-section of the VOK deposit and our underground infrastructure looking west. The results from the North Block 2020 resource expansion drill program intercepted high-grade gold as far as 300 meters from the current resource shelf and as high as 2,590 grams per tonne gold over 1 meter. As we reported earlier this week, in 2020, we also completed about 14,000 meters of resource expansion drilling outside of the resource shell from the 1080 Level to the east, west and at depth below the VOK deposit. Here, looking at Slide 24 is another cross-section of the VOK, this time, looking north. The results from the 1080 Level drill program included high-grade gold intercept as far as 200 meters below and 200 meters east of the current resource shell and as high as 1,635 grams per tonne gold over 1 meter. The results from the North Block Zone and the 1080 Level continued to highlight the potential to expand beyond the Valley of the Kings deposit. We intend to continue resource expansion drilling through 2021 with 82,000 meters of drilling planned. Follow-up drilling within the North Zone and 1080 Level is currently underway with 24,000 meters already completed. Assays' results are pending. Stay tuned. Looking ahead to the rest of 2021, we will continue to emphasize safety. We will also maintain our strict COVID safety protocols to minimize the potential for another outbreak at site. Based on our production and gold price estimates, we expect to generate a significant amount of cash this year, which will be used in part to reduce debt. We look forward to continuing to announce drill results. We will continue to provide results from the 2021 resource expansion drilling throughout the year as they become available. Looking further ahead, we will continue to advance our exploration efforts near mine with the intention of growing our existing resources. Thank you. That concludes the formal presentation. I will now turn the call over to the operator, who will open the line for your questions. Operator?

Operator: [Operator Instructions]. The first question comes from Ovais Habib from Scotiabank.

Ovais Habib: And just a quick -- a couple of quick questions for me. I believe you kind of touched upon the all-in sustaining costs. Obviously, they were lower in Q1 due to COVID. Now will we see a little bit of a catch-up over here on these cost remaining quarters for the year? Or is it going to get kind of pushed out as we go quarter-to-quarter into 2022?

Matthew Quinlan: I think the best way to look at it, Ovais, is we're reaffirming our guidance for the year. So we were below that range. So I think you should use just the guidance for the year going out. We think we're going to be within the guidance for the year. I think that's the easiest way to answer that question. And it was really the sustaining capital levels in the quarter that resulted for us being below guidance in the first quarter.

Ovais Habib: Sounds good. Just wanted to double check on that. And then just moving on to -- obviously, there was a lot of drilling done in Q1, I believe 40,000 meters. A lot of that was infill as well. Any kind of color you can provide in terms of those infill results? How they paid out compared to your expectations?

Patrick Godin: We are -- actually, the drilling is going well, not as fast as we expect to have because of the -- mainly because we're impacted by COVID. But actually, we are -- the result or we have a lag between the laboratory results, the prior assay result and the drilling. So it will be -- the result will show up more in Q2 than Q1 actually.

Ovais Habib: Got it. Okay. And just moving on in terms of you did mention that there were some -- Q2 is going to be impacted by some performance issues on several stopes. Any color you can provide, maybe I've missed it and you've kind of touched upon it. Any color you can provide as to what those issues that you're having? And what are you guys doing in terms of mitigating any future occurrences?

Patrick Godin: Mainly on this one, is what is happening is, first is that we had 2 or 3 stopes that the grade that we have actually, after all the mining and the definition drilling, and the grade control that is lower that we expect. And basically, it's 2, 3 stopes and it's impacting more -- it will impact more of the Q2 because it's a stope that we developed in Q1. We will be below the low end by a few thousand ounces, but we are not into panic here. Actually, we are in the range of the variability of the reserve's accuracy in the -- with the ore body that we have.

Ovais Habib: Okay. Sounds good. And just a final one for me, and then maybe I'll jump back into the queue. In terms of your underground development, that seems to be advancing pretty well. At the end of Q1, you guys had approximately about 2.5 months of drill stope inventory versus like 1 or 2 weeks of stope inventory same time last year. You were talking about getting closer to that 4 months of drill stope inventory. In terms of this whole situation with COVID, do you guys think that you guys are on track on that front? I mean obviously, things seem to be moving pretty well.

Patrick Godin: Because it's important for all of us to have enough inventory to succeed and to mitigate the variability of this ore body. And it's something that we want to keep the pressure and go full steam ahead to achieve this objective, because it's important for us. I can say to you that we're impacted by COVID big time at some stage, sometimes we had more than 30 people in installation at site and 14 were impacted by COVID -- infected. So it's -- it impact us -- it impacts us. But the guy, the -- they worked really well. We prioritized our activities, and we focus on the KPIs. And actually, I'm pleased because the results are not initially showing all the effort that were invested by our guys in the field. So they did an amazing job and actually with something that we can catch it up. And actually, we are on the way to do this.

Operator: Our next question comes from Heiko Ihle from H.C. Wainwright.

Heiko Ihle: I'm going to maybe build on a question that was just asked. It looks like your all-in sustaining cost was $1,005 per ounce, and this is a quote from your release. You incurred reduced levels of sustaining capital expenditures relative to expectations, which lowered the all-in sustaining costs below guidance range. But then you go on to say that you don't expect all-in sustaining costs to be below the guidance range for the balance of the year. Nonetheless, you left the overall guidance for the year unchanged. We're halfway through Q2 and maybe I'm reading a whole bunch into nothing here, but is there some delayed spend? Or should we, in theory, could we take the midpoint of guidance for Q2 to Q4 and then the actuals for Q1? Is there anything we're missing? Or has anything changed on your end that implicitly, it took the guidance up slightly for Q2, Q3 and Q4?

Jacques Perron: No, I think, Heiko, the reason why our sustaining CapEx is lower in the first quarter is we didn't do all the drilling that we wanted to do and the development that we wanted to do. So that reduced. But now as Pat mentioned, we introduced a seventh drill underground. We are pushing hard on development to catch up. We had good performance on development in Q1, but honestly, we were expecting to do a lot better than that. Similar for production, we almost had 3,800 tonnes per day, but we were hoping to be a little bit above 3,800 tonnes per day. So our activities were impacted, so our level of spending was impacted. So in the next quarter, we're going to play catch up to get to the end of the year, where we were supposed to be in our original plan. So in the coming quarters, we'll spend more money. Our hope is that at the end of the year, we're back on track with our plan. So our AISC cost and production will be within our guidance range. So it's really, the message, and I think the message that we want to convey here is -- and -- this is my fifth quarterly conference call with the company. And I've said this many, many times, it is a variable ore body. We're going to have ups and downs. We have risk of COVID, so things are going to -- they're not going to be flat all the time. There's going to be ups and downs, but I think what we are trying to do is make sure that we don't surprise anyone. We -- that was a comment we hear in the past. Oh, we always get surprised. We always get surprised. And we're trying not to surprise anybody. We're laying it out there. Q2 is going to be not as good as Q1 in terms of production, but we're still confident in our guidance. We're still confident our costs will be in line with what we were expecting. So we're not panicking here, things at this end are good. It's -- we said many times that we could get a quarter that is not as good as the other ones, and that's going to be Q2 this year.

Heiko Ihle: Yes. You're mentioning how this is your fifth call as a decent lead over into my next question, given that I have asked the same question on the past one of these calls before, but that was under the old management team. Your new CFO has now been on the job since September, so over half a year. On that note, congratulations to Matthew. But if you maybe want to just give us some color on your minimum level of cash that you'd like to keep on your balance sheet, again with the new management team, obviously. And at what point of time you'd consider returning some incremental capital to shareholders, whether through a buyback or a dividend, please?

Jacques Perron: We're in the same situation, Heiko, as we said before. Priorities for us is, one, keep about $100 million of cash on the balance sheet at all times. So we want to do that, especially during COVID. We want to have the cash if we need to adjust or if we have disruptions at site, because of COVID. So we think 3 months of spendings, of expenditures for the operation and the company, that's what we want to have on the balance sheet at all times. We also want to make sure that when we get to Q1 2020 -- 2021 -- 2022, sorry, when it gets into Q1 2022 that we have $200 million of cash on the balance sheet, because we will have to pay $100 million for the convert that matures at the end of March 2022. And we want to keep $100 million of cash. So we need to have $200 million at that point. Between now and then, it's reducing our debt. We've met -- we are paying $17 million a quarter. We made a discretionary payment of $38 million this quarter. And we still have another $100-plus million of term loan debt that we need to continue to deal with. So that's our priority. Once we get there, and hopefully, COVID is kind of behind us. I'm not too sure about that. But anyway, we'll see when we get there. That's when we're going to start to think about what do we do in terms of capital allocation, reinvesting in the business, returning money to shareholders in different forms. But until then, our priority is reducing our debt and maintaining a sound cash balance at all times.

Heiko Ihle: Great. And once again, a decent layover into just a quick clarification. You had the outbreak in the COVID outbreak in February and March, obviously. And that was the last time there was even just a single positive case at site, correct? There has been zero across your workforce since then, right?

Jacques Perron: We had zero at -- starting -- start -- in mid-March, we went down to 0. We were at 0 for the last -- the following, I think it's 4, 5 weeks. And about 10 days ago, one employee that came to site. So we test all the employees as they arrive at site. And he tested positive. So there's one person currently in isolation that is positive, and I believe that person is going to come out of isolation in the next couple of days.

Patrick Godin: 6th of May.

Jacques Perron: May 6?

Patrick Godin: May 6.

Jacques Perron: So May 6, the person is coming out of isolation. So at that point, we'll have no cases at site. So it's really well managed, Heiko. It's -- we test people when they -- before they take the plane in Vancouver and we test other -- people that don't fly from Vancouver, they get tested as soon as they arrive at site with a rapid antigen test. So we get the results within a few minutes. Starting this week, we're going to start to test people at the Terrace Airport and also at our Smithers Office, people that bus to site. So everybody will be tested prior to coming to site with only a few exceptions. So we will completely insulate the site from COVID cases. So if someone gets positive, they'll be before they travel by plane or by bus, so we'll -- they'll return home and go quarantine at their personal residence.

Patrick Godin: In addition to the support -- with the support of Northern Health, we also started the vaccination at site. So -- and we -- and actually, we have the AstraZeneca that is available for our employees. And starting today, we will provide the -- give the vaccine for the people who want to have it, for the people who are higher than 30 years old. So it's going to -- it's -- we're improving the distribution at site, actually.

Heiko Ihle: Very good. Well, I hope that the worker that comes out of quarantine tomorrow feels good and fine, and I wish him the best in getting better.

Operator: Our next question comes from Anita Soni from CIBC World Markets.

Anita Soni: So my first question is with regards to the commentary in the release and the MD&A about performance of certain stopes in Q1. Could you just elaborate on that? I'm kind of having a little bit of trouble understanding what you mean by that?

Patrick Godin: What that means is...

Anita Soni: Yes. With respect to the grade variability being that it's going to be variable in Q2, given that there was some performance-related issues in stopes in Q1.

Patrick Godin: Yes. Just to be relative is to bring some colors. We are mining -- last year, we mined 69 stopes for the year -- during the year. So we have multiple stopes. So it means that we're mining more or less 15 to 16 stopes per quarter. In the stope that we developed in Q1, we have 3 stopes who are in volume, in tonnes and ore in grade. When we did the definition that the grade is -- the head grade that is after grade control is lower than what we expect in the reserves. Sometimes it's by 2 grams, sometimes it's by 4 grams, so we're not losing everything, but as they are representing a good volume in terms of tonnage for the quarter, so it will slightly have less production than we expect during the quarter. It's part of the variability of the ore body. With this ore body, will have a nugget effect. So sometimes, we have positive, sometimes we have negatives. It's -- and we are still in the range of that the reconciliation of the reserve that we'll present to you at the end of the year. So basically, it's -- it will be a few thousand ounces, but we're not panicking. It means -- you just mean and it's not coming from one area. So it's -- the stopes are spread -- it's more or less 3 stopes or a different area of the mine. So we're not seeing a trend here. So it's more local and more in function of the nugget effect of the ore body.

Anita Soni: Okay. That was going to be my follow-up question if it was in a specific area, but it sounds like it's not. And then secondly, I just wanted to ask on your comments on capital allocation. So you talked about after you've paid down your debt and getting your cash balance to where you want it to be, you wanted to reinvest in the business and then also return capital to shareholders in various forms. So could you just elaborate to me by what you mean by reinvest in the business? Does this mean that you're going to look to developing satellite deposit, look to drill more, look to diversify your cash flows through M&A?

Jacques Perron: Yes. Anita, it's maybe all of the above, but we're drilling a lot this year, and we're excited by what we're seeing right now with our results. You'll get -- already this year, we issued 2 great press releases. Last year, at the end of -- we issued another great press release on a Hanging Glacier. Depending on what we're going to get from the drilling we're going to do this year, we may decide -- and this is just -- I'm just giving an example here, if we're very successful at Hanging Glacier, we may decide to start to put money there to have a satellite ore body that would feed the mill in 2, 3 years down the road. But I'm not saying that's what we're going to do, but I'm just giving you examples. So it's difficult for us to say exactly what we intend but -- to do. But the results are so good. Everywhere we drill right now, we hit gold. So the results are so encouraging that we kind of expect that when we get all the results together, we're going to be compelled to invest money in some parts of the ore body to advance the development. So that's one area that we're looking at, for sure. We're getting good results from the North Block. The North Block is very close to our infrastructure. It's currently not in the reserve. So it's -- and not in the resource. So it's not in our overall plan or in terms of CapEx. But we may decide when we put the budget together for next year, we may decide that we're going to accelerate the North Block because the results are good, and the grades are really good. So we may decide to push on that one sooner than later. So those are the type of reinvestment that we're going to be thinking for, for Brucejack. And we'll see what else shows up and where we have to put money. So it's -- we know if we don't have any good projects or good investments for the cash that we have, for sure, there might be a higher percentage of our cash flow that goes back to shareholders. If we do have good projects, probably going to be a lower percentage or maybe not even anything. And that's the discussion that it's not management that will make that final decision. It's a Board decision, dividends or share buybacks or that type of instruments will be considered when we get there.

Anita Soni: Okay. And then I wanted to follow-up with one second question on the drilling that you guys are doing. Can you just give me some color on the things that you are doing differently with the drilling versus the, I guess, the -- what led to the issue that Brucejack and with the reconciliation having to use the mine call factor? So just trying to get an understanding, as you look at this thing, are you taking into account the challenges that the original ore body had when developing this geological model?

Jacques Perron: Yes. I think what we're doing differently, Anita, is basically is the density of data. The density of drilling, the -- it's a nuggety deposit. And when it's drilled widely, you have some local issues in estimating the grade. The global resource you can probably get a decent number. But locally, it's very challenging when you don't have the level of drilling that is required. So just basically, what we're doing is we're drilling a lot more with diamond drills ahead of the areas we want to develop. But also, we're adding to this the RC drilling. When we get closer to the zones and zones that are a little more complex, and we continue to do the RC drilling, initially, that was -- it started as a test in 2020, end of '19 and 2020. Now we have 2 RC drills dedicated to definition drilling that are providing us very good value. And the mix of diamond drilling with RC drilling and production hole sampling is really helping us understand a lot better the local behavior of the various zones.

Anita Soni: And the last follow-up on that, I mean, opinions on Multiple Indicator Kriging, could we expect to see that going forward?

Jacques Perron: Yes. That's -- at this time, that's what we're -- we have to work the resource. We're going to continue to work with that. We're doing some analysis and test of how we're going to approach this. But definitely in the VOK zone, we're going to continue to use the MIK or the NMIK to understand the resource. In other zones, where it's simpler, like the West Zone, for example, it's more conventional resource estimation.

Operator: Our next question comes from Joseph Reagor from ROTH Capital Partners.

Joseph Reagor: Congrats on a good start to the year.

Jacques Perron: Thank you, Joe.

Joseph Reagor: So most of my questions have already been answered, but maybe just on the guide that you gave for Q2, what kind of magnitude below the annual guidance are you guys expecting? Annual guide divided by 4 in the low end would be about 81,000 ounces and change. Are we talking a few thousand ounces lower than that? Are we talking 10%, 15% below that? Like, just so we have a rough idea.

Jacques Perron: As Pat said, Joe, it's a few thousand ounces.

Joseph Reagor: Okay. And then...

Jacques Perron: Now that being said, Joe, as you know, mining is always a very interesting business. It's always possible that we try to give the best information, but it's possible that we have a stope that comes out much higher grade than predicted or lower. These things can always happen. So -- but right now, based on where we are, where to understand, it's a few thousand ounces.

Joseph Reagor: Okay. Okay. All right. That's fair enough. And then on the debt front, are you guys actively looking at potentially like refinancing out the remainder of your debt? Or is it just a focus of paying a debt -- paying it all off to get debt free?

Matthew Quinlan: Joe, it's Matthew here speaking. Thanks for the question. Yes, we are -- we do have a supportive bank syndicate. That revolver matures in December of 2022, and we're going to be looking to refinance that and extend that revolver and term loan with our supportive group of banks in the coming months. So stay tuned.

Operator: Our next question comes from Andrew Mikitchook from BMO Capital Markets.

Andrew Mikitchook: Congratulations on a good quarter. Lots of great questions already been asked. Can we just get a little bit of color on throughputs? Even with the COVID impacting what looks like almost half of your quarter, you had very strong throughputs in Q1. Is that -- did you have any period in that time where throughputs came down and then you were able to catch up? Or were your teams essentially able to keep the mill essentially full? I know you've already commented you're hoping to be slightly further on a tonnes per day than what you did. But can you give us a sense of what the impact was in Q1, please?

Patrick Godin: Yes. So in Q1, the -- we were close to the objective. We planned 3,800, so we're close by. Going forward, we have the capacity to catch up what we missed in Q1. So it's not necessarily a problem. So we are -- actually, our plan is to forecast up to the maximum that is authorized by the permit is 1,387,000 ounces -- tonnes, sorry. Ounces is going to be totally different. But in terms of tonnes and we have no restriction in the mill demand is something that is well designed. The mill is robust. The mill is having overcapacity. So and the recovery is -- we're improving in terms of recovery. So we are watching really tightly the tails grade and think is one something that is robust at the site is the mill so have no issue, no concern with the mill performance going forward.

Jacques Perron: We had to -- Andrew, we had to reduce throughput for about 3 weeks. There was a period of 3 weeks where we took the throughput, which is -- so we operate at about 4,000 tonnes a day. When you apply the mechanical availability, it gives you a 3,800. And for about 3 weeks, we were more like at a 3,000 tonne per day. And then when the workforce was back and we were able to -- really, the mill was -- could have done more, but it's just because of all the people we had in quarantine and isolation, we just couldn't bring the tonnes to surface to keep the mill going at full throughput. But when people were back in -- on the scoops and the trucks, we had days we were running easy at 4,200, 4,300 tonnes a day.

Andrew Mikitchook: Okay. And one thing sometimes we see here is kind of delayed maintenance when you're trying to catch up, is should that -- did that occur? Could there -- are you guys going to come back in the balance of the year telling us so we took a week's maintenance because it didn't happen in Q1?

Patrick Godin: No. We are right on the -- we respect the -- we are respecting our preventive maintenance schedules, and we are right on. We've never skipped any maintenance in the mill or elsewhere.

Andrew Mikitchook: Okay. And just very quick last question, I think, has been asked over and over again. You guys have answered in quite a bit of detail. But Q2, the miss is -- from all your commentary, is essentially grade-related. Like you guys demonstrated in Q1, you're not expecting a throughput miss in Q2. It's just the sequencing and grade variability that's giving you the slight miss in Q2?

Jacques Perron: Yes. No, you're correct, Andrew. It's -- our mill can process tonnes. And the mine can feed tonnes because as we said, we had at the end of the quarter, 270,000 tonnes of inventory, so we can -- we have the tonnes. What we're not doing anymore, it's something that we've changed is we're not jeopardizing the sequence. We're not jumping around left and right and doing all kinds of crazy things just to meet grades. We have a sequence. We want to mine properly. We want to mine the right way. We want to make sure we don't generate drop mechanics issues long term. So we're not jumping around. And this was a problem that was happening in the past, and we said we're not doing this. So we're following the sequence. We have the tonnes, but sometimes, as Pat mentioned, we have stopes that grade is a little lower than what was expected, and that's going to impact our grade. But we are following the sequence. And as we said, we continue to be confident in our guidance for the year.

Operator: Our next question comes from Don DeMarco from National Bank Financial.

Don DeMarco: Maybe just one more run at the exploration success that you've been having. Could you comment or compare what -- where you see the most upside? What the highest priority might be? Or potential timing to production between the 1080 Level or the North Block? I see they're both in close proximity to the mine.

Patrick Godin: Look for this, we need to complete the definition, but the North Block is close by. So it's -- and it's a pretty -- it's really promising. It's a nice one that we will -- we are actually doing the second phase of drilling in the North Block. So that's something that's interesting. As we go down with around 1080 that we released on Monday is really close by. So in terms of priority, it's difficult for me to schedule that with you, but it's in the -- it will be close in the pipeline, don't worry. And it's -- and actually, we are also working on the West -- on the West Zone, so we're doing the drilling in the West Zone, so to anticipate the work as much as we can. So no, it's -- it will be -- we'll see -- we will have access in this type of zone next year in the mining plan, probably.

Don DeMarco: Okay. And I guess that's my next question. With all these developments, can you confirm that's what your plan is, indeed, to issue a technical report with a new mine plan next year at some point?

Patrick Godin: Yes. It's what we're sticking into the plan, and we want to release a new 43-101 report for the first half of 2022.

Don DeMarco: Okay. And based on what you're seeing right now in the North Block and the 1080, we recognize the West Zone grades might ease slightly compared to the Valley of the Kings. Is there any chance that you might defer production from the West Zone and prioritize more on some of these newer developments that you see in expanding the Valley of the Kings?

Jacques Perron: It is possible, Don, that we decide to prioritize North Block or 1080 compared to West Zone. But again, this year, we also have a drilling program in the West Zone, and we'll see what we get there. Depending on the results we'll get from the West Zone and what we get from North Block and 1080, we'll have to make decisions. We won't be able to go everywhere at the same time. But I wouldn't discount the West Zone just yet. There's interesting things in the West Zone. If you go back to the old 43-101, there's the R8 structure that develops a very high gold grade at depth. And so again, as Patrick said, More to come with drilling results. We have a very exciting year of drilling, a very, very exciting year of drilling, very good targets. As I said earlier, stay tuned because there might be some very, very interesting news coming out in the future.

Don DeMarco: Okay. Great. Well, we'll keep an eye on those. And we also look forward to the updated technical report next year.

Operator: This concludes the question-and-answer session. I would like to turn the call back over to Mr. Perron for any closing remarks.

Jacques Perron: Thank you, everyone, for dialing into our earnings call this morning. We appreciate all the comments and all the questions. We tried hard to make sure that you understand that we want to deliver on what we promised. And we want to meet our guidance for this year, and we're on track to do that. We want to make sure that we avoid surprising the market, so we're doing that. So things are moving in the right direction. We have a lot of work ahead of us to achieve all our objectives for this year. But as we said, we're on track to do what we want to do. There's a number of initiatives underway, and we look forward to updating you on the results of everything we're going to do in Q2 and Q3. And once again, I want to conclude the call by thanking the entire Pretium team for their dedication and hard work as we continue to operate through these very challenging times. So thank you very much, everybody. Stay safe, and we'll talk to you soon. Bye now.

Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.