EX-99.1 2 ex99-1.htm CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018
 

 

Exhibit 99.1

 

 (PRETIVM LOGO)

 

 

 

 

 

 

 

 

PRETIUM RESOURCES INC.

 

 

 

 

 

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED

JUNE 30, 2019 AND 2018

(Expressed in thousands of United States Dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

Suite 2300, Four Bentall Centre

1055 Dunsmuir Street, PO Box 49334
Vancouver, BC V7X 1L4

Phone: 604-558-1784
Email: invest@pretivm.com

 

 

PRETIUM RESOURCES INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
(Unaudited - Expressed in thousands of United States dollars)
            
      June 30,   December 31, 
   Note  2019   2018 
              
ASSETS             
              
Current assets             
Cash and cash equivalents     $34,281   $45,407 
Receivables and other  3   26,256    18,312 
Inventories  4   26,119    24,751 
       86,656    88,470 
Non-current assets             
Mineral properties, plant and equipment  5   1,521,301    1,522,919 
Restricted cash      1,687    2,029 
Total assets     $1,609,644   $1,613,418 
              
LIABILITIES             
              
Current liabilities             
Accounts payable and accrued liabilities  6  $62,413   $50,672 
Current portion of long-term debt  7   75,609    85,961 
       138,022    136,633 
Non-current liabilities             
Other liabilities  6   12,789    1,072 
Long-term debt  7   411,595    456,254 
Convertible notes      84,912    82,150 
Decommissioning and restoration provision  8   20,928    18,947 
Deferred income tax liability      19,972    15,236 
       688,218    710,292 
              
EQUITY             
              
Share capital  12   1,144,226    1,140,890 
Contributed surplus  12   49,241    48,886 
Equity component of convertible notes      17,603    17,603 
Accumulated other comprehensive loss      (193,997)   (193,997)
Deficit      (95,647)   (110,256)
       921,426    903,126 
Total liabilities and equity     $1,609,644   $1,613,418 
              
Contingencies  15          

 

 On behalf of the Board of Directors:

      
       

“David S. Smith”		  
“George N. Paspalas”		  

David S. Smith

(Chair of the Audit Committee)

  

George N. Paspalas

(Director)

  

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

2

 

PRETIUM RESOURCES INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF EARNINGS AND COMPREHENSIVE EARNINGS
(Unaudited - Expressed in thousands of United States dollars, except for share data)
            
      For the three months ended   For the six months ended 
      June 30,   June 30,   June 30,   June 30, 
   Note  2019   2018   2019   2018 
                        
Revenue  9  $113,202   $146,478   $216,321   $235,900 
                        
Cost of sales  10   83,413    86,408    157,380    158,996 
                        
Earnings from mine operations      29,789    60,070    58,941    76,904 
                        
Corporate administrative costs      4,305    3,390    8,272    5,888 
                        
Operating earnings      25,484    56,680    50,669    71,016 
                        
Interest and finance expense  11   (8,782)   (16,422)   (18,182)   (32,061)
Interest and finance income      236    420    523    622 
Foreign exchange (loss) gain      (379)   16    (695)   (67)
(Loss) gain on financial instruments at fair value  7   (3,467)   3,581    (10,993)   944 
                        
Earnings before taxes      13,092    44,275    21,322    40,454 
                        
Current income tax expense      (1,051)   (1,708)   (1,977)   (2,334)
Deferred income tax expense      (1,598)   (11,470)   (4,736)   (15,081)
                        
Net earnings for the period     $10,443   $31,097   $14,609   $23,039 
                        
Other comprehensive earnings, net of tax                       
Items that will not be reclassified to earnings or loss:                       
Change in fair value attributable to change in credit risk of financial instruments designated at fair value through profit or loss      -    1,926    -    3,864 
                        
Comprehensive earnings for the period     $10,443   $33,023   $14,609   $26,903 
                        
                        
Earnings per common share                       
Basic     $0.06   $0.17   $0.08   $0.13 
Diluted  12f  $0.06   $0.17   $0.08   $0.13 
                        
Weighted average number of common shares outstanding                       
Basic      184,400,998    182,464,495    184,297,426    182,421,838 
Diluted  12f   185,488,424    183,475,543    185,335,409    183,570,562 

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

3

 

PRETIUM RESOURCES INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
(Unaudited - Expressed in thousands of United States dollars)
                    
      For the three months ended   For the six months ended 
      June 30,   June 30,   June 30,   June 30, 
   Note  2019   2018   2019   2018 
                        
CASH FLOWS FROM OPERATING ACTIVITIES                       
Net earnings for the period     $10,443   $31,097   $14,609   $23,039 
Items not affecting cash:                       
Current income tax expense      1,051    1,708    1,977    2,334 
Deferred income tax expense      1,598    11,470    4,736    15,081 
Depreciation and depletion      20,842    20,907    37,026    33,931 
Interest and finance expense, net      8,583    15,818    17,790    31,192 
Loss on disposal of plant and equipment      10    -    10    - 
Loss (gain) on financial instruments at fair value  7   3,467    (3,581)   10,993    (944)
Settlement of offtake obligation  7   (904)   (1,586)   (1,744)   (2,281)
Share-based compensation  12   2,311    1,850    3,829    2,589 
Unrealized foreign exchange loss      780    322    1,197    369 
Changes in non-cash working capital items:                       
Receivables and other      (10,317)   (1,248)   (8,427)   982 
Inventories      371    7,935    (1,551)   5,055 
Accounts payable and accrued liabilities      3,999    (5,707)   2,659    (6,638)
Income taxes paid      (1,051)   (1,709)   (1,977)   (2,714)
Net cash generated by operating activities      41,183    77,276    81,127    101,995 
                        
CASH FLOWS FROM FINANCING ACTIVITIES                       
Payment of lease obligations      (1,628)   (143)   (3,184)   (143)
Proceeds from exercise of share options      2,018    747    2,278    1,104 
Repayment of loan facility  7   (44,667)   -    (64,667)   - 
Transaction costs associated with loan facility      (100)   -    (267)   - 
Interest paid      (6,893)   -    (15,289)   (1,125)
Net cash generated by (used in) financing activities      (51,270)   604    (81,129)   (164)
                        
CASH FLOWS FROM INVESTING ACTIVITIES                       
Expenditures on mineral properties, plant and equipment  5   (7,290)   (5,771)   (12,685)   (15,513)
Restricted cash      227    -    410    - 
Interest received      236    419    523    621 
Net cash used in investing activities      (6,827)   (5,352)   (11,752)   (14,892)
Increase (decrease) in cash and cash equivalents for the period      (16,914)   72,528    (11,754)   86,939 
                        
Cash and cash equivalents, beginning of the period      50,868    70,540    45,407    56,285 
Effect of foreign exchange rate changes on cash and cash equivalents      327    (573)   628    (729)
Cash and cash equivalents, end of the period     $34,281   $142,495   $34,281   $142,495 

 

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

4

 

PRETIUM RESOURCES INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY
(Unaudited - Expressed in thousands of United States dollars, except for share data)
                                
   Note  Number of
common
shares		   Share
capital		   Contributed
surplus		   Equity
component of
convertible
notes		   Accumulated
other
comprehensive
loss		   Deficit   Total 
Balance - December 31, 2017      182,337,874   $1,125,932   $49,942   $17,603   $(193,772)  $(152,644)  $847,061 
                                       
Adjustment on adoption of  IFRS 9, net of tax      -    -    -    -    (5,768)   5,768    - 
                                       
Adjusted balance -  January 1, 2018      182,337,874   $1,125,932   $49,942   $17,603   $(199,540)  $(146,876)  $847,061 
                                       
Shares issued upon  exercise of options  12   202,500    1,673    (569)   -    -    -    1,104 
                                       
Value assigned to  options vested  12   -    -    1,901    -    -    -    1,901 
                                       
Other comprehensive earnings  for the period, net of taxes      -    -    -    -    3,864    -    3,864 
                                       
Earnings for the period      -    -    -    -    -    23,039    23,039 
                                       
Balance - June 30, 2018      182,540,374   $1,127,605   $51,274   $17,603   $(195,676)  $(123,837)  $876,969 
                                       
                                       
Balance - December 31, 2018      184,163,091   $1,140,890   $48,886   $17,603   $(193,997)  $(110,256)  $903,126 
                                       
Shares issued upon  exercise of options  12   405,825    3,336    (1,058)   -    -    -    2,278 
                                       
Value assigned to  options vested  12   -    -    1,413    -    -    -    1,413 
                                       
Earnings for the period      -    -    -    -    -    14,609    14,609 
                                       
Balance - June 30, 2019      184,568,916   $1,144,226   $49,241   $17,603   $(193,997)  $(95,647)  $921,426 

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

5

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2019 and 2018
(Expressed in thousands of United States dollars, except for share data)
 

 

1.NATURE OF OPERATIONS

 

 Pretium Resources Inc. (the “Company”) was incorporated under the laws of the Province of British Columbia, Canada on October 22, 2010. The address of the Company’s registered office is Suite 2300, Four Bentall Centre, 1055 Dunsmuir Street, PO Box 49334, Vancouver, BC, V7X 1L4.

 

 The Company was formed for the acquisition, exploration, development and operation of precious metal resource properties in the Americas. The Company’s primary asset is its wholly-owned underground Brucejack Mine located in northwestern British Columbia.

 

2.STATEMENT OF COMPLIANCE

 

These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board and interpretations of the International Financial Reporting Standards Interpretations Committee.

  

These condensed consolidated interim financial statements should be read in conjunction with the Company’s most recent annual consolidated financial statements. The Company’s significant accounting policies applied in these condensed consolidated interim financial statements are the same as those applied in note 3 of the Company’s annual consolidated financial statements as at and for the year ended December 31, 2018, except for the adoption of IFRS 16, Leases effective January 1, 2019. The details of the impact on adoption and the revised accounting policies were disclosed in our condensed consolidated interim financial statements for the three months ended March 31, 2019.

 

As at June 30, 2019, the Company has cash and cash equivalents of $34,281 and a working capital (current assets less current liabilities) deficit of $51,366. Based on management’s cash flow projections, the Company expects that future operating and debt settlement requirements will be satisfied from operating cash flows.

 

These condensed consolidated interim financial statements are presented in United States dollars (“USD”), which is the Company’s functional currency. All dollar amounts are expressed in thousands of USD, except for share data, unless otherwise noted as Canadian dollars (“CAD” or “C”).

 

These condensed consolidated interim financial statements were authorized for issue by the Board of Directors on August 1, 2019.

 

3.RECEIVABLES AND OTHER

 

   June 30,   December 31, 
   2019   2018 
           
Trade receivables  $22,315   $14,487 
Prepayments and deposits   2,337    3,332 
Tax receivables   1,502    420 
Other receivables   102    73 
   $26,256   $18,312 

6

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2019 and 2018
(Expressed in thousands of United States dollars, except for share data)
 

 

4.INVENTORIES

 

   June 30,   December 31, 
   2019   2018 
         
Materials and supplies  $13,303   $11,548 
Finished metal   12,479    12,745 
In-circuit   337    458 
   $26,119   $24,751 

 

As at June 30, 2019, $3,707 (2018 – $3,138) of depreciation and depletion and $307 (2018 – $199) of site share-based compensation was included in inventory.

 

5.MINERAL PROPERTIES, PLANT AND EQUIPMENT

 

   Mineral
properties		   Construction
in progress		   Plant and
equipment		   ROU assets   Exploration and
evaluation assets		   Total 
Cost                        
Balance - December 31, 2018  $812,627   $9,183   $556,056   $-   $252,007   $1,629,873 
                               
Adjustment on adoption of IFRS 16   -    -    -    11,891    -    11,891 
Transfer from plant and equipment to right-of-use assets   -    -    (888)   888    -    - 
                               
Adjusted balance - January 1, 2019   812,627    9,183    555,168    12,779    252,007    1,641,764 
                               
Additions   -    14,576    2,103    6,496    921    24,096 
Transfer from construction in progress to plant and equipment   -    (5,223)   5,223    -    -    - 
Transfer from construction in progress to mineral properties   70    (70)   -    -    -    - 
Disposals   -    -    (32)   -    -    (32)
                               
Balance - June 30, 2019  $812,697   $18,466   $562,462   $19,275   $252,928   $1,665,828 
                               
Accumulated depreciation and depletion                              
Balance - December 31, 2018  $50,990   $-   $55,964   $-   $-   $106,954 
                               
Transfer from plant and equipment to right-of-use assets   -    -    (42)   42    -    - 
                               
Adjusted balance - January 1, 2019   50,990    -    55,922    42    -    106,954 
                               
Depreciation and depletion   18,930    -    16,100    2,565    -    37,595 
Disposals   -    -    (22)   -    -    (22)
                               
Balance - June 30, 2019  $69,920   $-   $72,000   $2,607   $-   $144,527 
                               
Net book value - June 30, 2019  $742,777   $18,466   $490,462   $16,668   $252,928   $1,521,301 

7

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2019 and 2018
(Expressed in thousands of United States dollars, except for share data)
 

 

5.MINERAL PROPERTIES, PLANT AND EQUIPMENT (Cont’d)

 

(a)Depreciation and depletion

  

For the six months ended June 30, 2019, $37,595 (2018 – $33,138) of depreciation and depletion was recognized in the statement of earnings.

 

(b)Right-of-use (“ROU”) assets

  

As at June 30, 2019, the Company’s ROU assets consisted of the following:

 

   ROU asset
Mobile equipment		   ROU asset
Buildings		   ROU asset
Other		   Total 
Cost                    
Balance - December 31, 2018  $-   $-   $-   $- 
                     
Adjustment on adoption of IFRS 16   9,325    2,509    57    11,891 
Transfer from plant and equipment to right-of-use assets   888    -    -    888 
Adjusted balance - January 1, 2019   10,213    2,509    57    12,779 
Additions   2,136    3,115    1,245    6,496 
Balance - June 30, 2019  $12,349   $5,624   $1,302   $19,275 
                     
Accumulated depreciation and depletion                    
Balance - December 31, 2018  $-   $-   $-   $- 
Transfer from plant and equipment to right-of-use assets   42    -    -    42 
Adjusted balance - January 1, 2019   42    -    -    42 
Depreciation and depletion   2,054    464    47    2,565 
Balance - June 30, 2019  $2,096   $464   $47   $2,607 
Net book value - June 30, 2019  $10,253   $5,160   $1,255   $16,668 

 

 The Company is a party primarily to lease contracts for mining related mobile equipment and buildings. Other ROU assets included IT related equipment and shipping containers for concentrate.

8

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2019 and 2018
(Expressed in thousands of United States dollars, except for share data)
 

 

6.ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

 

   June 30,   December 31, 
   2019   2018 
         
Trade payables  $38,492   $24,814 
Lease obligations   16,898    748 
Accrued liabilities   8,387    16,945 
Employee benefit liability   4,585    4,398 
Restricted share unit liability   4,002    1,502 
Deferred share unit liability   1,176    997 
Royalty payable   786    629 
Accrued interest on convertible notes   651    660 
Accrued interest on loan facility   225    1,051 
   $75,202   $51,744 
Non-current portion of lease obligations   (11,055)   (518)
Non-current portion of restricted share unit liability   (1,734)   (554)
Current portion of accounts payable and accrued liabilities  $62,413   $50,672 

 

(a)Lease obligations

 

As at June 30, 2019, the Company’s undiscounted lease obligations consisted of the following:

 

   June 30,   December 31, 
   2019   2018 
         
Gross lease obligation - minimum lease payments          
1 year  $6,568   $277 
2-3 years   9,032    527 
4-5 years   2,664    35 
   $18,264   $839 
Future interest expense on lease obligations   (1,366)   (91)
   $16,898   $748 

 

For the six months ended June 30, 2019, interest expense on lease obligations was $392 (2018 – $5). Total cash payments on lease obligations was $3,680 which included $496 for short-term leases.

  

Variable lease payments not included in the measurement of lease obligations were nil as at June 30, 2019. There were no extension options, which were reasonably certain to be exercised, included in the measurement of the lease obligation. As at June 30, 2019, there were no significant leases with residual value guarantees or leases not yet commenced to which the Company is committed.

9

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2019 and 2018
(Expressed in thousands of United States dollars, except for share data)
 

 

7.LONG-TERM DEBT

  

As at June 30, 2019, the Company’s long-term debt consisted of the following:

 

   Offtake
obligation		   Senior secured
loan facility		   Total
long-term debt		 
Balance - December 31, 2018  $70,069   $472,146   $542,215 
Settlement of offtake obligation   (1,744)   -    (1,744)
Loss on financial instruments at fair value   10,993    -    10,993 
Transaction costs on loan facility   -    (34)   (34)
Amortization of loan facility transaction costs   -    441    441 
Repayment of loan facility   -    (64,667)   (64,667)
Balance - June 30, 2019  $79,318   $407,886   $487,204 
Current portion of long-term debt   (10,540)   (65,069)   (75,609)
Non-current portion of long-term debt  $68,778   $342,817   $411,595 

 

(a)Senior secured loan facility

  

On December 18, 2018, the Company closed a $480,000 senior secured loan facility (the “loan facility”) with a syndicate of financial institutions arranged by The Bank of Nova Scotia, ING Capital LLC and SG Americas Securities, LLC. The loan facility is comprised of a $250,000 senior secured amortizing non-revolving credit facility (the “term facility”) and a $230,000 senior secured revolving credit facility (the “revolving facility”). The loan facility is secured by substantially all of the assets of the Company and its subsidiaries.

  

The term of the loan facility is four years, maturing on December 18, 2022. The undrawn portion of the loan facility at June 30, 2019 was $18,000.

 

Each borrowing under the term and revolving facilities is available by way of USD London Inter-Bank Offered Rate (“LIBOR”) loans or USD base rate loans. The revolving facility is also available in various other forms, including Canadian prime loans, bankers’ acceptances, bankers’ acceptance equivalent loans, and letters of credit.

 

Borrowings comprising USD LIBOR loans shall bear interest at LIBOR plus an applicable margin of 2.5% to 3.5% based on the Company’s net leverage ratio. As at June 30, 2019, the LIBOR on the Company’s borrowings was 2.4%. Borrowings comprising USD base rate loans shall bear interest at the administrative agent’s base rate plus an applicable margin of 1.5% to 2.5% based on the Company’s net leverage ratio. Interest is payable on the last day of the interest period related to a borrowing. For the six months ended June 30, 2019, $13,339 (2018 – nil) of interest expense was expensed as interest and finance expense in the statement of earnings.

 

On June 28, 2019, the Company repaid the first quarterly installment on the term facility in the amount of $16,667. Equal installments of principal will be paid quarterly until maturity. The required principal repayment of $30,000 on the revolving facility was repaid by the Company to reduce the available facility to $200,000. The Company made additional principal repayments totaling $18,000, reducing the outstanding balance on the revolving facility to $182,000. The remaining principal of the revolving facility is required to be repaid as a bullet payment in full on the maturity date. Any unused portion of the revolving facility is subject to a standby fee of 0.6% to 0.8%.

10

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2019 and 2018
(Expressed in thousands of United States dollars, except for share data)
 

 

7.LONG-TERM DEBT (Cont’d)

 

Transaction costs associated with the loan facility were $7,983 (2018 - $7,949) including an underwriting fee equal to 1.55% of the amount of the commitment related to the loan facility. The transactions costs have been recorded as a loan discount and will be amortized over the term of the loan. For the six months ended June 30, 2019, $441 (2018 – nil) of amortization of the loan facility transaction costs were expensed to interest and finance expense in the statement of earnings.

 

The effective interest rate for the loan facility as at June 30, 2019 is 5.8%. The Company is subject to financial covenants including interest coverage ratio, leverage ratio, tangible net worth and minimum liquidity under the terms of the loan facility. As at June 30, 2019, the Company was in compliance with all financial covenants.

  

(b)Offtake obligation

  

The Company entered into an agreement pursuant to which it will deliver 100% of refined gold up to 7,067,000 ounces. The final purchase price to be paid by the purchaser will be, at the purchaser’s option, a market referenced gold price in USD per ounce during a defined pricing period before and after the date of each sale.

 

The Company has the option to reduce the offtake obligation by up to 75% by paying $13 per ounce effective December 31, 2019 on the then remaining undelivered gold ounces.

  

For the six months ended June 30, 2019, the Company delivered 168,219 (2018 – 188,918) ounces of gold under the offtake agreement. Of the amount settled, the Company physically delivered 107,335 (2018 – 124,188) ounces from doré production and purchased 60,884 (2018 – 64,730) ounces to satisfy delivery of gold produced from concentrate sales. The settlement of the gold ounces resulted in a decrease in the offtake obligation of $1,744 (2018 – $2,281).

 

The offtake obligation is recorded at fair value at each statement of financial position date. For the six months ended June 30, 2019, the change in fair value of the offtake obligation was a fair value loss of $10,993 (2018 – gain of $944).

  

8.DECOMMISSIONING AND RESTORATION PROVISION

 

The Company has a liability for remediation of current and past disturbances associated with the exploration, development and production activities at the Brucejack Mine. The decommissioning and restoration provision is as follows:

 

   For the six months ended   For the year ended 
   June 30,   December 31, 
   2019   2018 
         
Opening balance  $18,947   $18,436 
Change in discount rate   1,490    215 
Accretion of decommissioning and  restoration provision   264    568 
Change in amount and timing of cash flows   227    (272)
Ending balance  $20,928   $18,947 

11

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2019 and 2018
(Expressed in thousands of United States dollars, except for share data)
 

 

8.DECOMMISSIONING AND RESTORATION PROVISION (Cont’d)

 

For the six months ended June 30, 2019, the provision increased due to a decrease in the discount rate. The Company used an inflation rate of 1.8% (2018 – 1.9%) and a discount rate of 1.8% (2018 – 2.4%) in calculating the estimated obligation. The liability for retirement and remediation on an undiscounted basis before inflation is $21,233 (2018 – $20,369). The majority of the expected expenditures to settle the decommissioning and restoration provision are expected to occur shortly after the end of the mine life.

 

9.REVENUE

 

Revenue by metal was:

 

   For the three months ended   For the six months ended 
   June 30,   June 30,   June 30,   June 30, 
   2019   2018   2019   2018 
                     
Gold revenue  $107,644   $147,417   $210,002   $234,685 
Silver revenue   1,490    1,640    2,958    2,961 
Revenue from contracts with customers  $109,134   $149,057   $212,960   $237,646 
Gain (loss) on trade receivables at fair value   4,068    (2,579)   3,361    (1,746)
   $113,202   $146,478   $216,321   $235,900 

 

Revenue from contracts with customers by product was:

 

   For the three months ended   For the six months ended 
   June 30,   June 30,   June 30,   June 30, 
   2019   2018   2019   2018 
                     
Gold revenue - doré  $71,440   $102,566   $141,302   $161,537 
Gold revenue - concentrate   36,204    44,851    68,700    73,148 
Silver revenue - concentrate   1,124    881    1,966    1,669 
Silver revenue - doré   366    759    992    1,292 
   $109,134   $149,057   $212,960   $237,646 

 

10.COST OF SALES

 

Total costs of sales were:

 

   For the three months ended   For the six months ended 
   June 30,   June 30,   June 30,   June 30, 
   2019   2018   2019   2018 
                     
Production costs  $55,961   $50,839   $108,970    106,053 
Depreciation and depletion   21,459    19,238    37,310    33,074 
Royalties and selling costs   4,688    4,954    9,092    10,689 
Site share-based compensation   898    700    1,611    1,044 
Change in inventories   397    10,677    387    8,136 
Loss on disposal of plant and equipment   10    -    10    - 
   $83,413   $86,408   $157,380   $158,996 

12

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2019 and 2018
(Expressed in thousands of United States dollars, except for share data)
 

 

10.COST OF SALES (Cont’d)

  

Production costs by nature of expense were:

 

   For the three months ended   For the six months ended 
   June 30,   June 30,   June 30,   June 30, 
   2019   2018   2019   2018 
                     
Consultants and contractors  $23,871   $27,416   $44,784   $56,268 
Salaries and benefits   15,553    9,713    30,834    19,677 
Supplies and consumables   8,716    6,409    16,780    14,700 
Energy   2,648    2,821    6,032    6,701 
Travel and camp accommodation   1,550    1,591    3,455    3,350 
Camp administrative costs   1,664    998    2,825    1,505 
Freight   1,218    878    2,824    1,926 
Insurance   377    314    733    734 
Rentals   364    699    703    1,192 
   $55,961   $50,839   $108,970   $106,053 

 

11.INTEREST AND FINANCE EXPENSE

 

   For the three months ended   For the six months ended 
   June 30,   June 30,   June 30,   June 30, 
   2019   2018   2019   2018 
                     
Interest expense on loan facility  $6,502   $-   $13,780   $- 
Interest expense on convertible notes   1,949    1,949    3,877    3,877 
Interest expense on leases   248    5    392    5 
Accretion of decommissioning and restoration provision   120    141    264    296 
Interest expense on construction credit facility   -    14,148    -    27,641 
Other interest expense (income)   (37)   179    (131)   242 
   $8,782   $16,422   $18,182   $32,061 

 

12.CAPITAL AND RESERVES

 

(a)Share capital

 

At June 30, 2019, the authorized share capital consisted of an unlimited number of common shares without par value and an unlimited number of preferred shares with no par value.

13

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2019 and 2018
(Expressed in thousands of United States dollars, except for share data)
 

 

12.CAPITAL AND RESERVES (Cont’d)

 

(b)Share options

  

The following table summarizes the changes in share options for the six months ended June 30:

 

   2019   2018 
   Number of
options		   Weighted
average
exercise price
(in CAD)		   Number of
options		   Weighted
average
exercise price
(in CAD)		 
Outstanding, January 1,   4,562,919   $9.47    6,454,327   $9.32 
Exercised   (405,825)   7.50    (202,500)   6.93 
Expired   (5,100)   12.97    (834,250)   13.67 
Forfeited   (9,900)   12.97    (23,750)   12.46 
Outstanding, June 30,   4,142,094   $9.54    5,393,827   $8.73 

 

For options exercised during the period, the related weighted average share price at the time of exercise was C$11.44 (2018 – C$9.99).

  

The following table summarizes information about share options outstanding and exercisable at June 30, 2019:

 

   Share options outstanding   Share options exercisable 
Exercise prices (in CAD)  Number of
options
outstanding		   Weighted
average years
to expiry		   Number of
options
exercisable		   Weighted
average
exercise price
(in CAD)		 
$5.85 - $7.99   1,311,250    1.22    1,311,250    7.02 
$8.00 - $9.99   1,547,969    2.23    1,147,377    9.20 
$10.00 - $11.99   130,000    2.64    77,200    10.73 
$12.00 - $13.99   1,117,875    3.44    394,430    13.07 
$14.00 - $15.99   35,000    2.12    35,000    15.17 
Outstanding, June 30, 2019   4,142,094    2.25    2,965,257   $8.86 

  

The total share-based compensation expense for the six months ended June 30, 2019 was $1,413 (2018 – $1,901), which was expensed in the statement of earnings.

  

(c)2015 RSU Plan – Restricted share units (“RSU’s”)

 

The following table summarizes the changes in RSU’s for the six months ended June 30:

 

   2019   2018 
   Number of
RSU’s		   Weighted
average fair
value (in CAD)		   Number of
RSU’s		   Weighted
average fair
value (in CAD)		 
Outstanding, January 1,   741,886   $11.31    729,064   $14.41 
Forfeited   (22,172)   10.97    (18,097)   10.92 
Outstanding, June 30,   719,714   $13.24    710,967   $9.83 

14

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2019 and 2018
(Expressed in thousands of United States dollars, except for share data)
 

 

12.CAPITAL AND RESERVES (Cont’d)

  

At June 30, 2019, a liability of $3,443 (2018 – $1,271) was outstanding and included in accounts payable and accrued liabilities. For the six months ended June 30, 2019, $2,077 (2018 – $403) was expensed in the statement of earnings as share-based compensation expense.

  

(d)2015 RSU plan – Performance share units (“PSU’s”)

 

The following table summarizes the changes in PSU’s for the six months ended June 30:

 

   2019   2018 
   Number of
PSU’s		   Weighted
average fair
value (in CAD)		   Number of
PSU’s		   Weighted
average fair
value (in CAD)		 
Outstanding, January 1,   166,085   $11.31    74,140   $14.41 
Outstanding, June 30,   166,085   $13.24    74,140   $9.83 

 

At June 30, 2019, a liability of $559 (2018 – $231) was outstanding and included in accounts payable and accrued liabilities. For the six months ended June 30, 2019, $312 (2018 – $89) was expensed in the statement of earnings as share-based compensation expense.

 

(e)2018 DSU Plan – Deferred share units (“DSU’s”)

 

The Company established a DSU plan for the benefit of the directors of the Company. Pursuant to the plan, eligible directors can elect to receive all or part of their total cash compensation in the form of DSU’s. The number of DSU’s granted to an eligible director is determined by dividing the portion of the compensation to be paid in DSU’s by the fair market value of the Company’s common shares on the conversion date. In addition, the Board may, at its discretion, grant additional DSU’s to plan participants. Each eligible director will be required to hold DSU’s received until the eligible director ceases to be a director of the Company, following which the DSU’s will be settled in cash.

  

The following table summarizes the changes in DSU’s for the six months ended June 30:

 

   2019   2018 
   Number of
DSU’s		   Weighted
average fair
value (in CAD)		   Number of
DSU’s		   Weighted
average fair
value (in CAD)		 
Outstanding, January 1,   117,587   $11.57    -   $- 
Outstanding, June 30,   117,587   $13.09    -   $- 

 

At June 30, 2019, a liability of $1,176 (2018 – $997) was outstanding and included in accounts payable and accrued liabilities. For the six months ended June 30, 2019, $135 (2018 – nil) was expensed in the statement of earnings as share-based compensation expense.

15

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2019 and 2018
(Expressed in thousands of United States dollars, except for share data)
 

 

12.CAPITAL AND RESERVES (Cont’d)

 

(f)Earnings per share

 

The calculation of diluted earnings per share was based on earnings attributable to ordinary shareholders and the weighted-average number of shares outstanding after adjustments for the effect of potential dilutive shares. For the six months ended June 30, 2019 potential share issuances arising from the exercise of share options and the settlement of restricted share units in common shares were included in the calculation of diluted weighted average shares outstanding as well as their impact on earnings attributable to shareholders of the Company. Potentially dilutive shares associated with the convertible notes and share options (out of the money) were not included in the diluted earnings per share calculation as their effect was anti-dilutive.

  

The following table summarizes the calculation of basic and diluted earnings per share:

  

   For the three months ended   For the six months ended 
   June 30,   June 30,   June 30,   June 30, 
   2019   2018   2019   2018 
                 
Net earnings for the period  $10,443   $31,097   $14,609   $23,039 
                     
Basic weighted average number of common shares outstanding   184,400,998    182,464,495    184,297,426    182,421,838 
Effective impact of dilutive securities:                    
Share options   872,136    778,987    822,693    916,663 
Restricted share units   215,290    232,061    215,290    232,061 
                     
Diluted weighted average number of common shares outstanding   185,488,424    183,475,543    185,335,409    183,570,562 
                     
Earnings per share                    
Basic  $0.06   $0.17   $0.08   $0.13 
Diluted  $0.06   $0.17   $0.08   $0.13 

 

13.RELATED PARTIES

 

Transactions with key management

 

Key management includes the Company’s directors (executive and non-executive) and executive officers including its Executive Chairman (“Exec Chair”), its President and Chief Executive Officer, its Executive Vice President and Chief Financial Officer, its Vice President, Operations, its Vice President and Chief Exploration Officer, and its Executive Vice President, Corporate Affairs and Sustainability.

 

Directors and key management compensation:

 

   For the six months ended 
   June 30,   June 30, 
   2019   2018 
Salaries and benefits  $955   $1,291 
Share-based compensation   2,273    960 
   $3,228   $2,251 

 

Under the terms of the Exec Chair’s employment agreement, effective January 1, 2017, the Exec Chair is entitled to a retirement allowance which remains due and payable in full in the event the Exec Chair terminates his employment with the Company. The retirement allowance remains a current liability as at June 30, 2019 (note 6).

16

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2019 and 2018
(Expressed in thousands of United States dollars, except for share data)
 

 

14.FINANCIAL RISK MANAGEMENT

 

The Company’s financial assets and liabilities are measured and recognized according to a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy are as follows:

 

  Level 1: Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
     
  Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
     
  Level 3: Inputs for the asset or liability that are not based on observable market data

 

The carrying values of cash and cash equivalents, receivables and other, accounts payable and accrued liabilities and the loan facility approximate their fair values due to the short-term maturity of these financial instruments.

 

The following tables present the Company’s financial assets and liabilities by level within the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

 

As at June 30, 2019  Carrying value   Fair value 
   FVTPL   Amortized   Level 1   Level 2   Level 3 
       cost             
Financial assets                         
Cash and cash equivalents  $-   $34,281   $-   $-   $- 
Trade receivables   22,315    -    -    22,315    - 
Restricted cash   -    1,687    -    -    - 
   $22,315   $35,968   $-   $22,315   $- 
                          
Financial liabilities                         
Accounts payable and  accrued liabilities  $-   $48,316   $-   $-   $- 
Lease obligations   -    16,898    -    -    - 
Restricted share unit liability   4,002    -    -    4,002    - 
Deferred share unit liability   1,176    -    -    1,176    - 
Senior secured loan facility   -    407,886    -    -    - 
Offtake obligation   79,318    -    -    -    79,318 
Debt portion of convertible note   -    84,912    -    84,912    - 
   $84,496   $558,012   $-   $90,090   $79,318 

17

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2019 and 2018
(Expressed in thousands of United States dollars, except for share data)
 

 

14.FINANCIAL RISK MANAGEMENT (Cont’d)

 

As at December 31, 2018  Carrying value   Fair value 
   FVTPL   Amortized   Level 1   Level 2   Level 3 
       cost             
Financial assets                         
Cash and cash equivalents  $-   $45,407   $-   $-   $- 
Trade receivables   14,487    -    -    14,487    - 
Restricted cash   -    2,029    -    -    - 
   $14,487   $47,436   $-   $14,487   $- 
                          
Financial liabilities                         
Accounts payable and  accrued liabilities  $-   $43,048   $-   $-   $- 
Restricted share unit liability   1,502    -    -    1,502    - 
Deferred share unit liability   997    -    -    997    - 
Senior secured loan facility   -    472,146    -    -    - 
Offtake obligation   70,069    -    -    -    70,069 
Debt portion of convertible note   -    82,150    -    82,150    - 
   $72,568   $597,344   $-   $84,649   $70,069 

 

The offtake obligation was valued using Monte Carlo simulation valuation models. The key inputs used by the Monte Carlo simulation in valuing the offtake obligation include: the gold forward curve based on Comex futures, long-term gold volatility, call option exercise prices and risk-free rate of return. The valuation of the offtake obligation also required estimation of the Company’s non-performance or credit risk and the anticipated production schedule of gold ounces delivered over the life of mine.

 

15.CONTINGENCIES

 

The Company is involved in various claims, litigation and other matters in the ordinary course and conduct of business. Some of these pending matters will take a number of years to resolve. While it is not possible to determine the ultimate outcome of such actions at this time, and inherent uncertainties exist in predicting such outcomes, it is the Company’s belief that the ultimate resolution of such actions is not reasonably likely to have a material adverse effect on its consolidation financial position or results of operations.

 

(a)Canadian class action

 

On October 29, 2013, David Wong, a shareholder of the Company, filed a proposed class action claim (the “Wong Action”) against the Company, Robert Quartermain (a director, and the President and the CEO of the Company at such time) and Snowden Mining Industry Consultants Ltd. (“Snowden”). The Wong Action was filed in the Ontario Superior Court of Justice.

 

The Wong Action alleges that the price of our shares on the TSX and NYSE suffered a significant drop in value following the announcement on October 9, 2013 of the resignation of Strathcona Mineral Services Ltd. (“Strathcona”), the consultant responsible for overseeing and reporting on the 10,000-tonne bulk sample, and the announcement of Strathcona’s reasons for resigning on October 22, 2013.

 

The Wong Action claims C$60,000 in general damages on behalf of a class of persons who acquired the Company’s securities between July 23, 2013 and October 21, 2013. Snowden is no longer a defendant in the Wong Action.

18

 

PRETIUM RESOURCES INC.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six months ended June 30, 2019 and 2018
(Expressed in thousands of United States dollars, except for share data)
 

 

15.CONTINGENCIES (Cont’d)

 

The plaintiff in the Wong Action brought a motion for leave to commence an action under the secondary market provisions in Part XXIII.1 of the Ontario Securities Act. The motion was heard on May 29 and 30, 2017. The Court allowed the plaintiff’s motion on July 20, 2017. The Company was denied leave to appeal this decision. The Company and Robert Quartermain consented to, and on January 23, 2019 the Court granted, an order certifying the Wong Action as a class proceeding pursuant to the Class Proceedings Act (Ontario).

 

The Company believes that the allegations made against it in the Wong Action are meritless and will vigorously defend them, although no assurance can be given with respect to the ultimate outcome. The Company has not accrued any amounts for the Wong Action.

 

(b)United States class action

 

Two putative class action complaints were filed against the Company and certain of its officers in the United States District Court for the Southern District of New York, one on September 7, 2018 and the other on October 19, 2018. The complaints were filed on behalf of an alleged class of all persons and entities who purchased or acquired shares of the Company between July 21, 2016 and September 6, 2018, and relate to public disclosures of the Company made between July 2016 and September 2018 regarding the Brucejack Mine.

 

On April 8, 2019, the United States District Court for the Southern District of New York issued an order granting Aurico Gold Fund LP’s motion to consolidate the two cases under the case caption “In re Pretium Resources, Inc. Securities Litigation” (the “Aurico Action”), appoint itself as lead plaintiff, and approve lead plaintiff’s selection of counsel. On June 21, 2019, the plaintiffs in the Aurico Action filed a Consolidated Amended Class Action Complaint. The Company has retained legal counsel in connection with these matters.

 

The Company believes that the allegations made against it and its officers in the Aurico Action are meritless and will vigorously defend them, although no assurance can be given with respect to the ultimate outcome. The Company has not accrued any amounts for this action.

 

(c)Construction claims

 

On April 24, 2017, Bear Creek Contracting Ltd. (“Bear Creek”) filed a Notice of Civil Claim against the Company (the “Bear Creek Action”) alleging that the Company owes Bear Creek C$14,563 in general damages in connection with work undertaken at the Brucejack Mine transmission line. The Bear Creek Action was filed in the Supreme Court of British Columbia.

 

The Company filed a Response to Civil Claim on July 31, 2017, opposing all of the claims and allegations made. Notices of Civil Claim have also been filed by Blue Max Drilling Inc. (April 24, 2017), More Core Diamond Drilling Services Ltd. (March 27, 2017), and Lakelse Air Ltd. (February 23, 2018) who were subcontractors working under Bear Creek. Responses to Civil Claim have been filed in those actions and the claims are understood to be subsumed in the amount claimed by Bear Creek. It is expected that the four actions will be joined.

 

The Company believes that the allegations made against it in the Bear Creek Action, and the other actions, are meritless and will vigorously defend the matter, although no assurance can be given with respect to the ultimate outcome of such proceedings. The Company has not accrued any amounts for any of the actions.

19