SOURCE: TMAC Resources Inc.

TMAC Resources Inc.

May 12, 2016 20:54 ET

TMAC's Hope Bay Path to Production Continues on Track and on Budget

TORONTO, ON--(Marketwired - May 12, 2016) -  TMAC Resources Inc. (TSX: TMR) ("TMAC" or the "Company") filed its Condensed Interim Financial Statements and Management's Discussion & Analysis ("MD&A") for the period ended March 31, 2016, which documents can be found on the Company's website at www.tmacresources.com or on SEDAR at www.sedar.com. The highlights provided below are derived from these documents and should be read in conjunction with them.

Dr. Catharine Farrow, Chief Executive Officer of TMAC, stated, "We are pleased with our progress to advance the Hope Bay Project to production late in 2016. During the first quarter, we made excellent progress on the underground development at Doris and on our ore stockpile, completed foundation work required in advance of Mill Building erection, and continued our work with Gekko Systems of Australia to execute on the procurement, fabrication and factory testing of the Processing Plant for shipment and installation during the second half of 2016. We remain on track and on budget for both initiating the commissioning of the processing plant and the stockpiling of over 100,000 tonnes of high-grade (approximately 15 g/t) ore we plan to mine by the end of 2016."

FIRST QUARTER 2016 HIGHLIGHTS

Hope Bay Project

  • Mining and mine development productivity and ore production were on target. Mining and mine development continued in the first quarter of 2016 with 58,100 tonnes of the planned 59,200 tonnes having been mined. Productivity averaged 0.4 metres per man-shift, exceeding the estimates of metres per man-shift published in the May 28, 2015 Prefeasibility Study (the "PFS"). Ore production was 12,800 tonnes at an estimated 13.3 grams of gold per tonne.
  • Taking into account ore mined in late 2015 and ore mined by the previous operator, based on the PFS estimates for the material mined, the stockpile is estimated to contain 34,000 tonnes of ore at a grade of 13.6 grams of gold per tonne, or 14,900 ounces of gold of which 14,000 ounces of gold are recoverable at the estimated recovery rate of 94%.
  • Manufacture of the processing plant (the "Processing Plant") by Gekko Systems Pty of Ballarat, Australia for delivery in 2016 was 84% complete at March 31, 2016, and is on budget and on schedule for delivery in the 2016 sealift.
  • Construction of the building that will house the Processing Plant (the "Mill Building") progressed with the foundations for the main walls and reclaim walls being completed. The Mill Building steel is on site and erection commenced in late April 2016.
  • As part of the Nunavut Impact Review Board ("NIRB") and Nunavut Water Board regulatory review process of the application to amend the Doris permits, including the Doris Project Certificate and the Nunavut Water Board Doris Water License (the "Doris Permit Amendments"), TMAC received technical comments from various Federal and Territorial government agencies and the Kitikmeot Inuit Association (collectively the "Reviewing Parties"). Responses to these comments were completed by TMAC and filed. A public hearing was held under the NIRB process with the Reviewing Parties and the general public from April 12 to 14, 2016. All outstanding issues were resolved, the file was closed and TMAC now awaits NIRB's recommendation to the Minister of Indigenous and Northern Affairs Canada ("INAC"). Once the NIRB process is completed, the Nunavut Water Board final review process will commence and includes a public hearing and approval from the Minister of INAC.

Financial and Corporate

  • All conditions precedent required to draw down the first tranche of the Debt Facility were satisfied and a drawdown of US$50,000,000 was completed. US$38,000,000 was converted to Canadian dollars at a foreign exchange rate of C$1.3904/US$1 and US$12,000,000 was retained to cover all non-Canadian dollar expenditures remaining in 2016.
  • A private placement (the "Flow-Through Financing") of 827,206 flow-through Common Shares of TMAC (the "Flow-Through Common Shares") was completed at a price of $10.88 per Flow-Through Common Share for gross proceeds of $9,000,000.

Statement of Profit or Loss
The net loss and comprehensive loss for the three months ended March 31, 2016 was $205,000, compared with $2,128,000 for the three months ended March 31, 2015.

Cash and Liquidity
At March 31, 2016, TMAC had $84 million of cash and cash equivalents, excluding restricted cash of $29 million, comprising a $10 million minimum cash balance in a segregated account in accordance with the Debt Facility requirements and $19 million invested in guaranteed investment certificates set aside as collateral for the letters of credit (the "Letters of Credit") that support environmental reclamation bonding and provide security for compliance under various agreements with indigenous organizations. The existing cash on hand and the US$70 million remaining to be drawn on the Debt Facility provide for an approximate $40 million cushion for the Company to achieve commercial production at the Hope Bay Project, beginning with Doris, in the first quarter of 2017.

2016 OUTLOOK

Hope Bay

  • Complete fabrication of the Processing Plant.
  • Deliver the Processing Plant and mobile equipment in the 2016 sealift.
  • Complete erection of the Mill Building and the installation of associated services.
  • Complete the installation of and initiate commissioning of the Processing Plant.
  • Complete preparation of the tailings impoundment area to receive tailings.
  • Stockpile by December 31, 2016, 110,700 tonnes of ore with an estimated 55,600 ounces of contained gold that, at a 94% recovery rate, is 52,300 ounces of recoverable gold.
  • Obtain the Doris Permit Amendments.
  • Complete and submit the draft environmental impact statement on Madrid and Boston.
  • Explore for additional ounces at Doris Connector and below the dyke at Doris North.
  • Complete SkyTEM Mag/EM and CGG Gravity airborne geophysical surveys.

Elu

  • Complete SkyTEM Mag/EM airborne geophysical surveys.

Financial and Corporate

  • Draw down the second tranche of funds remaining under the Debt Facility.

THE HOPE BAY PROJECT'S PATH TO PRODUCTION OVERVIEW

With the $9 million of funds raised from the Flow-Through Financing, the total estimated cash outflows, including working capital, for the combined 2015 and 2016 years for the Path to Production plan has increased from $325 million to $334 million. As at March 31, 2016, TMAC had incurred $201 million of the planned $334 million of cash outflows under the Path to Production plan. The cash outflows to date are in line with the Path to Production plan in terms of timing and the amount of cash outflows. The expenditures included in the Path to Production are based on the two calendar years commencing January 1, 2015. Accordingly, by the end of March 2016, TMAC is 15 months into those planned 24 months of expenditures, or 63% of the way, and envisions achieving commercial production during the first quarter of 2017.

Table 1 shows the expected cash outflows over the two year period 2015-2016 detailed in the Path to Production plan and the expenditures to date. TMAC is now approximately two thirds of the way through the Doris development period and has incurred 60% of the planned expenditures.

 
Table 1: Path to Production cash outflows for the period from January 1, 2015 to December 31, 2016.
 
Principal Purpose   Path to Production 2015-2016   Incurred to March 31, 2016
    $ million   $ million
Hope Bay Project development costs        
  Direct costs   145   93
  Indirect costs   20   13
  Capitalized pre-production operating costs   54   26
Hope Bay Project development sub-total   219   132
  Collateral for Letters of Credit   26   19
  Corporate, exploration, permitting and general expenditures related to the Hope Bay Project   89(1)   51
Total   334(1)   201
         
(1)
Includes $9 million from the Flow-Through Financing completed March 18, 2016.
(2)
Comprises $325 million of the Path to Production and $9 million from the Flow-Through Financing.
   

The Path to Production envisions TMAC having a high-grade gold ore stockpile on surface at December 31, 2016 totalling 110,700 tonnes containing 55,600 ounces of gold (at 15.2 g/t) to provide the Processing Plant with significant high-grade feed at start up, a smooth production ramp up to 1,000 tonnes per day in 2017 and to 2,000 tonnes per day in 2018. 

Table 2 sets forth the production achieved to March 31, 2016 compared with the expected ore tonnes on the stockpile as per the Path to Production plan.

 
Table 2: Path to Production metrics for the pre-production period 2015 - 2016.
Development:   As at March 31, 2016   Path to Production 2016
Ore (tonnes)   21,300   98,000
Waste (tonnes)   70,300   197,000
Total   91,600   295,000
Estimated Stockpile:(1)        
Ore   34,000   110,700
Gold (contained ounces)   14,900   55,600
         
(1)
Estimated stockpile on surface includes 12,700 tonnes of ore containing an estimated 5,600 ounces of gold (at a 94% recovery rate is 5,300 ounces of recoverable gold) that had been brought to surface prior to underground development commencing in October 2015 (i.e. ore from test mining by TMAC in early 2015 and by Newmont in 2010 prior to TMAC's acquisition of Hope Bay).
   

ADDITIONAL MATERIAL

Following is a link to a video showing the Mill Building construction site as it appeared on Monday, May 9, 2016 to give readers an aerial view of TMAC's progress to date.

https://www.youtube.com/watch?v=_5VYTetgwOw&feature=youtu.be

We encourage our readers to review TMAC's first quarter 2016 MD&A as well as it contains a number of photos of both the site construction and the Processing Plant fabrication, as well as figures relating to our exploration activities.

ANNUAL GENERAL MEETING OF SHAREHOLDERS

TMAC will host its annual general meeting of shareholders on June 21, 2016 at 4:30 pm Eastern Time in the TSN Theatre at The Hockey Hall of Fame, 30 Yonge Street, Toronto, Ontario.

ABOUT TMAC

TMAC holds a 100% interest in the Hope Bay Project located in Nunavut, Canada. TMAC is a fully financed, gold development company. During 2015, TMAC significantly de-risked the Hope Bay Project financially by securing equity and debt financing for gross proceeds of over $350 million providing full funding for the Company to achieve its Path to Production plan, beginning with the Doris Mine, by the end of 2016. The Company has a board of directors with depth of experience and market credibility and an exploration and development team with an extensive track record of developing high grade, profitable underground mines.

FORWARD-LOOKING INFORMATION

This release contains "forward-looking information" within the meaning of applicable securities laws that is intended to be covered by the safe harbours created by those laws. "Forward-looking information" includes statements that use forward-looking terminology such as "may", "will", "expect", "anticipate", "believe", "continue", "potential" or the negative thereof or other variations thereof or comparable terminology. Such forward-looking information includes, without limitation, bringing the Hope Bay Project into production, beginning with the timing of the erection and completion of the Mill Building, fabrication, delivery and construction of the Processing Plant, the commissioning of the Processing Plant at Doris by the end of 2016, the availability of funds under the Debt Facility, and that the cash on hand and drawdowns under the Debt Facility will be sufficient to fully fund the Hope Bay Project and the objectives of the exploration program.

Forward-looking information is not a guarantee of future performance and is based upon a number of estimates and assumptions of management at the date the statements are made, including among other things, assumptions about: the ability meet the conditions precedent to drawdowns under the Debt Facility; the ability to raise any additional capital needed to advance the development of the Hope Bay Project to production; future prices of gold and other metal prices; the geology of the Hope Bay Project being as described in the Company's PFS technical report for the Hope Bay Project filed on SEDAR; accuracy of the mineral resource and mineral reserve estimates in the PFS; the metallurgical characteristics of the deposit being suitable for the processing plant; the successful and timely delivery, installation and operation of the Processing Plant; favourable weather conditions for planned sealifts and construction activities; production costs being as estimated in the PFS; accuracy of budgeted exploration and development costs and expenditures, including to complete development of the infrastructure at the Hope Bay Project; the price of other commodities such as fuel; future currency exchange rates and interest rates; favourable operating conditions; political and regulatory stability; receipt of governmental approvals and permits and all necessary third party financing on favourable terms; obtaining renewals for existing licences and permits and obtaining all other required licences and permits; sustained labour stability; stability in financial and capital goods markets; availability of equipment; positive relations with the Kitikmeot Inuit Association and Nunavut Tunngavik Inc. and other local groups; and the Company's ability to operate in the harsh northern Canadian climate. Furthermore, such forward-looking information involves a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, performance or achievements of the Company to be materially different from any future plans, intentions, activities, results, performance or achievements expressed or implied by such forward-looking information. See "Risk Factors" in the Company's AIF dated February 25, 2016 filed on SEDAR at www.sedar.com for a discussion of these risks.

The Company cautions that the foregoing lists of important assumptions and factors are not exhaustive. Other events or circumstances could cause actual results to differ materially from those estimated or projected and expressed in, or implied by, the forward-looking information contained herein. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, investors should not place undue reliance on forward-looking information.

SOURCE TMAC Resources Inc.

   
CONDENSED STATEMENT OF FINANCIAL POSITION  
(Unaudited)  
(Expressed in Canadian dollars)  
   
    As at March 31, 2016     As at December 31, 2015  
    $000s     $000s  
Assets            
Current assets            
  Cash and cash equivalents   83,723     44,101  
  Amounts receivable   1,160     3,996  
  Consumables, materials and supplies   22,362     26,486  
  Prepaid expenses   1,905     2,152  
  Equipment held for sale   500     500  
    109,650     77,235  
             
Non-current assets            
  Property, plant and equipment   700,213     649,443  
  Goodwill   80,600     80,600  
  Restricted cash   29,141     18,656  
  Other assets   7,487     28,497  
    817,441     777,196  
Total assets   927,091     854,431  
             
Liabilities            
Current liabilities            
  Accounts payable and accrued liabilities   13,292     12,735  
  Other liabilities   2,382     -  
    15,674     12,735  
             
Non-current liabilities            
  Debt Facility   61,916     -  
  Gold Call Options   4,222     2,731  
  Provision for environmental rehabilitation   24,719     24,719  
  Deferred tax liabilities   70,690     71,440  
    161,547     98,890  
Total liabilities   177,221     111,625  
             
Equity            
  Share capital   762,444     755,896  
  Warrants   2,936     2,936  
  Contributed surplus   6,710     5,989  
  Accumulated deficit   (22,220 )   (22,015 )
    749,870     742,806  
Total equity and liabilities   927,091     854,431  
             
   
CONDENSED STATEMENT OF PROFIT OR LOSS  
(Unaudited)  
(Expressed in Canadian dollars)  
   
    Three months ended March 31, 2016     Three months ended March 31, 2015  
    $000s     $000s  
General and administrative            
  Salaries and wages   1,643     501  
  Share-based payments   576     1,079  
  Professional and consulting fees   159     133  
  Travel   89     19  
  Investor relations   147     28  
  Depreciation   4     4  
  Office, regulatory and general   238     119  
Loss before the following   2,856     1,883  
Finance income   (140 )   (120 )
Finance expense   190     502  
Foreign exchange loss (gain)   (3,493 )   1  
Fair value adjustments   1,491     -  
Other   26     79  
Loss before income taxes for the period   930     2,345  
Deferred income tax expense (recovery)   (725 )   (217 )
Net loss and comprehensive loss for the period   205     2,128  
             
Net loss per share            
  Basic & diluted   (0.00 )   (0.04 )
             
Weighted average number of shares (thousands)            
  Basic and diluted   77,746     49,211  
             
   
CONDENSED STATEMENT OF CASH FLOWS  
(Unaudited)  
(Expressed in Canadian dollars)  
   
    Three months ended
March 31, 2016
    Three months ended
March 31, 2015
 
    $000s     $000s  
Net loss for the period   (205 )   (2,128 )
             
Operating activities            
Adjusted for:            
  Share-based payments   576     1,079  
  Finance income   (140 )   (120 )
  Finance expense   190     502  
  Depreciation   4     4  
  Unrealized foreign exchange loss (gain)   (3,493 )   1  
  Fair value adjustments   1,491     -  
  Deferred income tax expense (recovery)   (725 )   (217 )
Increase (decrease) in non-cash operating working capital:            
  Amounts receivable   2,922     122  
  Prepaid expenses   -     (1 )
  Accounts payable and accrued liabilities   -     (580 )
Operating cash flows before interest and tax   620     (1,338 )
Cash tax paid   -     -  
Cash interest paid   -     (381 )
Cash flows from (used in) operating activities   620     (1,719 )
             
Investing activities            
Additions to property, plant and equipment   (27,622 )   (11,619 )
Interest received   113     120  
Restricted cash   (10,485 )   -  
Cash flows from (used in) investing activities   (37,994 )   (11,499 )
             
Financing activities            
Third Equity Financing, net of issue costs   -     40,282  
Debt Facility drawdown   69,520     -  
Flow-through financing, net of issue costs   8,904     -  
Cash flows from (used in) financing activities   78,424     40,282  
             
Effects of exchange rate changes on cash and cash equivalents   (1,428 )   -  
Net increase in cash and cash equivalents for the period   39,622     27,064  
Cash and cash equivalents at the beginning of the period   44,101     32,044  
Cash and cash equivalents at the end of the period   83,723     59,108  
             

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