Pretium Resources Inc. (PVG) CEO Jacques Perron on Q1 2020 Results - Earnings Call Transcript

Pretium Resources Inc. (AON) Q1 2020 Earnings Conference Call May 1, 2020 11:00 AM ET

Company Participants

Jacques Perron - President and Chief Executive Officer

Tom Yip - Chief Financial Officer

Richard O'Brien - Board Chair

David Prins - Vice President, Operations

Conference Call Participants

Justin Chan - Numis Securities

Anita Soni - CIBC

Joseph Reagor - Roth Capital Partners

Mark Mihaljevic - RBC Capital Markets

Heiko Ihle - H.C. Wainwright

Adam Graf - B. Riley

Andrew Mikitchook - BMO capital markets

John Tumazos - John Tumazos Very Independent Research

Operator

All participants please standby. Your conference is ready to begin. Thank you all for joining us this morning. Welcome to the Pretium Resources First Quarter 2020 Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. The conference call today is being webcast live and available along with the presentation slides on Pretium's website at pretivm.com.

I will now turn the call over to Mr. Tom Yip, Pretium's CFO. Please go ahead.

Tom Yip

Good morning, everyone. Welcome to our first quarter 2020 operating and financial results call. Joining me on the call today is our Board Chair, Richard O'Brien, and Jacques Perron, who has just joined Pretium as President and CEO. Richard and Jack will take the opportunity to discuss our leadership transition. Then I will review the operational and financial highlights of the first quarter. At the end of my prepared remarks, David Prins our Vice President Operations will join and we will address your questions on the results from the first quarter.

Before we begin note our statements contain forward-looking information and future oriented financial information based on certain assumptions. I will refer you to the cautionary language included in our news release and as well as a management 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.

Now I'll turn the call over to our Chair, Richard O'Brien.

Richard O'Brien

Thank you Tom. First I'd like to thank everyone at the company for their hard work that contributed to another profitable quarter. The determination of our team has been even more evident over the last couple of months as we face the unprecedented challenges related to the COVID-19 pandemic and continued safe operations at Brucejack.

On Monday we were pleased to announce that Jacques Perron has joined our team as President and Chief Executive Officer and I'm happy to introduce him now. Jacques career of over 35 years in the global mining industry comprises roles in technical and operational leadership and the contribution to numerous boards. In key senior executive positions Jacques served as president chief executive officer and director of Thompson Creek Metals until it was acquired by Centerra Gold. And prior to that he was director, president and CEO of St. Andrews Goldfields. The board looks forward to working with him as he brings his extensive underground operating experience and professional insights to drive the continued success of Pretium and the Brucejack Mine . Welcome Jacques and with that will turn over to Jack.

Jacques Perron

Thank you Richard and good morning everyone. I'm very happy to be here today. After Thompson Creek Metals I vowed that I would not return to an active management role unless it was for the right opportunity. Pretium is that opportunity. The Brucejack Mine is a unique world-class asset. It is well built with both mining and milling operations working well with excellent potential for resource expansion. The company is financially robust and has been consistently profitable since achieving production with strong cash flow generation.

Most importantly Pretium has a solid safety record. All of this to the credit of the team who advanced the project from discovery to development and into profitable operations. Every mine has its own unique challenges and Brucejack is no different as it is well-known the biggest challenge has been understanding and mining the gold grade distribution of Brucejack's heterogeneous deposit. I believe the March 2020 update to mineral reserves and resources and the life of mine plan is a big step in the right direction.

I look forward to leveraging my past experience as we move forward to unlock the potential of this asset. However, I still have a lot to learn and will be rolling up my sleeves including spending a lot of time at the mine itself in the coming weeks and months.

A key priority for any incoming CEO is to meet with management, employees, stakeholder communities, and First Nation's partners. We are all facing an unusual situation due to the pandemic and they need to maintain physical distancing. I am one week into a two-week quarantine in Vancouver having crossed the border into Canada from the US. Even if I were not in quarantine, our head office personnel are working from home right now, so that creates yet another challenge in terms of getting to know everyone.

I also intend to meet personally with our shareholders but it will likely take a bit longer than usual for that to happen. The return of marketing roadshows may not occur until sometime in the future but in the meantime I look forward to virtually connecting and speaking with shareholders and I value your insights and feedback.

We are in a healthy financial position that improves with each ounce of gold produced from Brucejack. We are already much better off than many other miners at this uncertain time. However, one of my early priorities will be a review of Pretium short-term liquidity. Given the unusual risks related to the COVID-19 pandemic it is prudent to consider our position.

Operationally speaking we are in the gold mining business and that's not going to change. We remain focused on safety and profitable growth. We will work as a team to identify areas to improve operational performance and we will continue our strategy to advance our significant exploration potential to unlock that unrecognized value.

For the long-term I see great potential here and believe we are well positioned for growth. I look forward to updating you in the coming months and I will now pass the call back over to our CFO Tom Yip. Tom?

Tom Yip

Thanks Jack. I will now provide a review of the first quarter operating financial results. As we continue to navigate to the challenges related to the COVID-19 pandemic, the company's primary commitment is to the safety and health of our workforce and neighboring communities in Northwest British Columbia. We have taken significant steps to adjust our procedures and protocols to limit the risk of COVID-19 exposure for our staff, their families and communities including modification of work shifts, attention to the details of safely transporting our crews and ensuring a safe operating and living environment for our work sites.

Only personnel necessary to support gold production continue to work at the mine while COVID-19 restrictions are in place. Consequently all capital projects and expansion drilling programs have been suspended and crews have been de-mobilized. Throughout the COVID pandemic the Brucejack Mine has operated continuously under the strict guidelines and directives of government health authorities. In terms of operations COVID-19 did not have a significant effect on first quarter gold production. Our shortage of personnel at the outset of the crisis in March resulted in a minor impact on development during the quarter.

Interruptions to the supply chain are not anticipated at present and the increased inventories have been established with supplies on the order accordingly.

We continue to monitor the situation and will assess the potential for longer-term impacts to mine production as we evaluate the continuing risks associated with the crisis. Subsequent to the quarter end at the precautionary measure to increase available liquidity the company drew down $16 million of the revolving portions of the loan facility and added to our March 31 cash balance of $40 million.

Over the first quarter we produced a 82,880 ounces of gold at an all-in sustaining cost of $996 per ounce gold sold. We remain on track to achieve 2020 gold production guidance of 325,000 to 365,000 ounces this year and maintain cost within our AISC guidance that ranges from $910 to $1060 per ounce of gold sold.

First quarter free cash flow was $41.8 million and an average realized gold price of $1,605 per ounce. The company remains on targets to achieve free cash flow for 2020 in the range of $100 million to $170 million and the 2020 forecast is based on an average gold price of $1,450 per ounce.

Foreseeable 2020 production and financial guidance remains achievable assume there is no significant impact on operations at the Brucejack Mine due to the COVID-19 pandemic. As described earlier while we have taken precautions to mitigate the risk of COVID-19 we are reviewing the future impact to development, Stope availability and production should the restrictions related to the COVID-19 persist.

If the current situation continues or if the government authorities mandate temporary closures or if the company is not able to maintain operations it could have a significant impact on cost and production. During this period of uncertainty we will focus on increasing our liquidity versus discretionary debt repayments on our revolver.

In the first quarter, 345,139 tons of ore were processed equivalent to a throughput rate of 3,793 tons per day. The mill feed grade averaged 7.8 grams per tonne gold and is within the estimated 2020 guidance range. We are processing all immediately available stopes above the [country] to ensure consistent mill supply while continuing to advance development.

Gold recovery for the first quarter of 2020 was 96.4% compared to 96.8% in the comparable period in 2019. We continuously review the mill process to identify opportunities to improve efficiency and optimize recoveries.

Over the quarter 357,674 tonnes of ore were mined. It filled into a mining rate of 9,330 times per day. A total of 2,784 meters of lateral development and 60 meters of vertical development were achieved. Through 2020 mining will continue to focus on advanced underground development and open up the mine to operate at a production rate of 3,800 tonnes per day. We continue our track record of positive cash flow and possibility again this quarter as we have every quarter since achieving commercial production on July 1st of 2017.

For the quarter we realized the gold price of $1,605 per ounce and increase of 22% over 2019 driving similar increases year-over-year in earnings from land operations and a significant adjusted earnings increase of 56% over the last year's first quarter. The robust gold environment also enabled us to generate strong free cash flow which increased 19% over last year's first quarter.

Turning to Slide 9. During the quarter we sold 80,460 ounces of gold compared to 81,434 ounces of gold in 2019. The $286 per ounce increase in gold price contributed to the 23% in total revenues of $126.6 million versus $103 million in 2019. Both sales are proceeding as planned with multiple off takers for both doorway and floor concentrates no sales disruptions are anticipated at this time. We processed 3,793 tonnes per day in the quarter compared to 3279 tonnes per day in Q1 of 2019. 2019 was a wrap-up year after receiving our permits in December of 2018 to increase our throughput for the nominal 2700 to 3800 tonnes per day. This resulted in cost for ton mill of $179 million for the quarter similar to $180 per ton in Q1 of last year.

Turning to Slide 11. Our cost of sales which equals production cash costs, depreciation and depletion, royalties and selling costs averaged to $1112 per ounce sold. This is compared to $908 for 2019. Depreciation and depletion expense increased in the quarter by approximately $120 per ounce sold. This is as a result of the updated reserves which we reported in March, 2020.

So total cash cost average $787 per ounce sold for the quarter versus $686 for 2019. Total spending was on the low end of guidance set out for 2020. Total costs were $7.5 million higher than in 2019 due to the increased lateral development and drilling this quarter as mill throughput increased over 2019.

Looking ahead, the company currently expects a modest impact on cost, operations continues with enhanced safety measures in effect related COVID-19. We continue to show robust earnings for mine operations of $37.1 million in the first quarter compared to $29.2 million in 2019. After deducting our corporate G&A cost we generated operating earnings for the quarter of $31.5 million compared to $25.2 million last year.

There are two items of note on our P&L. The first is interest in financing expensive of $7.7 million compared to $9.4 million in Q1 2019. The decrease was driven by lower outstanding loan balance and lower LIBOR rates throughout the period. Secondly, we encouraged $18.7 million of taxes during this quarter. This consists of $1.3 million of cash taxes related to the BC Mineral tax and $17.4 million related to deferred taxes. The significant increase in our deferred taxes is due to the weakening of the Canadian dollar impacting the value of our BC mineral tax pools which are denominated in Canadian dollars.

We currently pay BC Mineral taxes at the [mineral] rate of 2% not 13% as we draw down our significant tax pools. Based on the updated life online and current gold prices we do not anticipate any cash taxes for federal and provincial income taxes three to four years. Thereafter, we anticipate paying taxes at a rate of 36.5% on mine operating earnings. Net earnings for the quarter were $6.2 million or $0.03 per share versus $4.2 million or $0.02 per share for 2019.

The adjusted earnings for items we believe are not reflective underlying operations of the company these are non-cash items consisting primarily of deferred income taxes and accretion on variable notes. The adjusted earnings were $25.9 million or $0.14 per share for the quarter compared to $16.5 million or $0.09 per share in the first quarter of 2019.

Turning to Slide 14. For the quarter we generated $52.5 million of cash flow from operations. This continues a record of positive cash flows from operations since startup in mid 2017. We generated $41.8 million in free cash flow defined as cash from operations less investing activities. The $52.5 million of operating cash flow generated this quarter enable us to pay $22.3 million on debt service and spend $11 million on CapEx. We ended the quarter with $40.6 million in cash.

At the beginning of the year, our syndicated loan facility totaled $382 million. We repaid the scheduled $16.7 million payment in the quarter and as a precautionary measure in response to the continuing operating risks related to COVID-19. We drew down $16 million which was available on our revolving portion of the loan facility. We will focus on liquidity rather than discriminatory debt repayment until the restrictions relate to COVID pandemic have been lifted.

On Slide 17, for the quarter our all in sustaining costs totaled $80.2 million and is tracking at the low end of our guidance range for the year. Assuming minimal impact for the COVID-19 pandemic we're maintaining our guidance. We're also maintaining our target of pre-cash flow of $100 million to $170 million at a gold price of 1,450 per ounce and as previously mentioned with the ongoing uncertainty related to the COVID-19 issue we will focus on increasing our liquidity versus discretionary debt repayments.

In the quarter the company announced an updated mineral reserve and resource estimate and a life of mine for the Brucejack Mine which highlights the continued robust economics of the long life underground operations. Following these updates we hosted an investors day technical session where we outlined a number of strategies we believe will help us optimize our stope design and improve the goad grade. Our priority remains increasing mine access. As we progress to 2020 lateral development will continue to focus on opening the mine at depth and towards the west through the Brucejack fault zone.

As Brucejack does not have a stockpile maintaining gold production as the mine requires sufficient stope inventory to support operations.

The increased availability should improve access to build stope inventory. We will then be able to increase the efficiency of the operations and enhance the opportunity to blend stope material from multiple areas. This is aimed at improving the tonnage available for mining and supporting great control. We highlighted two drilling initiatives in the technical session planned for 2020. A reverse circulation definition program to improve stope design and a resource expansion program designed to follow up on valley of the King-style mineralization at depth and to the east.

These initiatives have been delayed while COVID-19 restrictions are in place. These programs were not factored into the 2020 life of mine plan update and were not incorporated into our 2020 production guidance. As such temporarily putting these initiatives on hold should not influence achieving our 2020 production targets. We are however reviewing the future impacts to development stope availability and production should the restrictions related to the COVID-19 persist.

We continue to take advantage of the favorable golden buyer. In the first quarter, our adjusted earnings were $25.9 million equivalent to $0.14 per share. We generated $52.5 million in cash flow operations and free cash flow of 41.8 million.

To sum up we have successfully navigated an unusual quarter. While we have addressed the immediate challenges presented above the COVID-19 crisis and continue to operate the Brucejack Mine, we are evaluating the potential for longer term impacts to our strategies and at this time we remain on track to achieve our 2020 production and cost guidance.

Thank you. That concludes the formal presentation. I will now turn the call over to the operator who will open the lines for your questions. Operator?

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Justin Chan of Numis Securities. Please go ahead.

Justin Chan

Hi Richard, Jacques and Tom morning and thanks for listening to call. My first one is just on development, I mean it looks like you're relatively close to a thousand meter per month budget in Q1. Can you just give us that figure for March and whether you feel that and, I guess where you were in April and whether that starts to become a constraint for this year or at your current levels do you feel like your stope availability is at a point where it shouldn't be an issue this year?

Jacques Perron

Justin good morning. Thank you for your question. I will ask Dave to answer your question. Dave please.

David Prins

Yes, good morning Justin. Thanks for the question. Development year-to-date as we published in MD&A is slightly short approximately 300 under meters under for the year. I just like to and last year it was slightly under as well. I just like to state the impact of that. We're also undertaking development for the longer term exploration which is not currently in our mine plan. So the meters we're not which is three to five years out those drilling horizons.

So obviously we're not punishing upfront our net term mine development. It's those leaders that are being taken away from that long-term development for the drilling programs.

So we're down due to COVID and a severe winter 300 meters and I think we can still, we still have a chance to make those up. So we shouldn't be off track by the end of the year and we should be able to make those meters up.

Regarding your question on stope availability. I would like to point out that stopes vary in size and drastically different in size. So I would rather refer to tons and at present we have drilled off 170,000 tonnes which is the best position that we've been in since the start of the mine. We must remember that we ramped up from up to the 3800 tonnes in Q4 of last year and in Q4 we actually overachieved on the throughput with budgeted.

So we're still crawling opening up the mine to build up that inventory but at this point in time, I mean our standard stope size for design purposes not to say it's a standard size are actually mine of 30 meters by 15, 25 meter high stope there's 32,000 tonnes, we have 5.3 of those available to us which is around five to six weeks of mining at 110,000 - 120,000 tonnes per month at 3800 tonne per day. So we're sitting in a good position. Unfortunately some of those stopes are sequence constrained which means they're not in the order we can just go and blast and mine tomorrow where they're dependent on pace field, geotechnical and other constraints as you would understand. I'll hand it back for the next question.

Justin Chan

Okay. Thanks Dave. That's really helpful and just as a follow-up to that. the numbers you reported in Q1 was there much of a trend into March as COVID started to have a larger impact and I guess if you could share what are your levels now and how do they relate to the levels in Q1 overall?

David Prins

Yes. Thanks Justin. I assume your questions relating to development. So obviously our biggest impact in Q1 was for COVID. That's when we had trouble getting people to site and transport people wanting to stay home because of family. So it was the peak reduction if I could put it that way in development. We're back on track. Now we're fully human resourced or manpowered back up in development and we're heading into achieving our daily target. So I think we're in a good position. So long as COVID doesn't come back and hit us and we've also got a new jumbo arrived on site as of yesterday helps out to meet and hopefully exceed our goals for this year. Thanks Justin.

Justin Chan

Okay. Excellent. Really pleased to hear that. Just two more. One I'll let you answer and then maybe I'll ask the last one after but on transverse and longitudinal, are you finding, do have more results from longitudinal and what are they finding so far and they supportive of greater integration and perhaps even incremental changes from the mine plan that we've just received?

Richard O'Brien

Dave you want to add to that as well?

David Prins

Yes. Thanks Justin. I was just playing with the microphone. Yes. Good question Justin. We did undertake a fair amount of longitudinal mining out there last year, substantial amount in fact but the longitudinal mining is only applicable to certain parts of the mine like if we're going out into the fault section this year and we're crossing the fault getting to mineralization that they were just predict it the way they will be going and transverse mining that and certain areas that be okay. They just you look at the geology there with all the drill information and the information have coming back that's a battle tools from the drifting in there and you can just see that some of those areas must be transverse mine.

Yet other areas you can go in and you can see clear traces out there why we should be longitudinal. So we are adopting a phased approach on this and it'll be I can see it think both transverse and longitudinal as we progress the mine plan does include both. At this point in time it's more transverse and longitudinal but again as we get out into the fault zone this which would [indiscernible] that percentage could increase of the longitudinal.

Justin Chan

Okay. Great. Thanks. And just my last one Jacques and perhaps Richard for the both of you strategically, on to get opportunity to kind of review high level what the partners, do you have anything that you'd like to share in terms of strategy on both operationally and sort of high levels for the company? What the purposes are beyond trading well and paying down debt?

Jacques Perron

Justin I think you will understand it's my first week in the chair. So a bit early to tell the market what I think we're going to be doing. My intent is to focus on the business, learn the business in the coming months, definitely spend some time with the team, regrouping to put together our plan going forward but like I said the strategy for us is to generate the maximum possible value. Which road we're going to take to get there that needs to be determined but at this time it's we're going to, I'm an operator I'm going to keep my head down, focus, work hard, focus on what we can control, what we need to control to make sure that we build the best possible business and then discussions around strategy and how we see the future that's going to come down the road.

Justin Chan

Okay. Very fair. Thanks a lot. I will say [indiscernible] but thanks very much guys. Very appreciated.

Jacques Perron

Thank you Justin.

Operator

Our next question comes from Heiko Ihle of H.C. Wainwright. Please go ahead.

Heiko Ihle

Hey, thanks for taking my questions and congratulations to Jacques on your new appointment there.

Jacques Perron

Thank you Heiko. That's very nice of you to say that.

Heiko Ihle

Gladly. So can you provide some details on how many people are currently present both above and underground at the site, the current payroll for April versus March and February and your quarantine requirements and also your fallback options on that? I assume that the newly arriving essential staff members are quarantined off-site for two weeks and I assume they're getting paid during that time but I mean can you just provide some color on that and how many people are in that quarantine, any other impacts we should look off. I know it's like six questions in one but I.

Jacques Perron

That's okay Heiko. That's good. Dave can you give us some color on the manpower and who is in and who is out?

David Prins

Sure Heiko. Thanks for the question. I got very good one. So typically we're at probably 670, 680 people on site. During the peak reduction in March we were down to 400, 410 people but that wasn't enough to sustain. Obviously we had people away we couldn't get people in from over to reach the mines. As of today we're probably at 445, 450 range. So development team back up to full resource power there now. So that tells you where we're at. So you can do the math on probably a couple of hundred people off site still that were on construction projects and other non-critical some management as well.

Quarantine, we currently have no one. Anyway, we’re actually feel that all the steps we've taken for COVID something they'd like to try and keep as we move forward typically for COVID and flu-type symptoms we have people in quarantine all the time but ironically that's all the cleaning we're doing, all the protocols and procedures we have in place for hygiene, our social distancing and all of the COVID related requirements that we're fully supporting and backing as a team.

We've actually been a couple of weeks now with anyone at all in quarantine. So it's a good thing. The next part of your question, yes we did put a small quantity of personnel off. They are on the construction teams at the short contracts and a couple of drillers I believe but yes we need to get their heads around in the future what we do with the remaining 200 people and some of them as we got down in March we had to ramp down quickly there because people couldn't get back to site. However, that is not a sustainable number. So we do need to get some of those people back to sustain it. So it's not in a very short term but for the medium term as well. So we'll be pumping those numbers back up. I hope that answers your question Heiko.

Heiko Ihle

Very much so. Thanks for all the color there. And then just one more so a lot of people get a chance to ask some questions. I went through your MD&A and through your own sustaining chart there on page 39 and it is like three things really yield with the cost increase in extra $7 million to $8 million of total cash costs, extra $2.3 million sustaining capital and extra $1.5 million of corporate DNA there. Tom can you maybe just provide a breakdown of the extra sustaining capital in dollar terms and also in the extra G&A please?

Jacques Perron

Tom?

Tom Yip

Thank you, Heiko. The G&A it was for additional cost related to the change in the leadership that we accrued in March. So that's pretty much what that was. The sustaining capital we're still projecting approximately $30 million plus or minus for the year and most of that is going to be sort of in the summer months as you typically know that's the best part of the time where we're getting most of our projects completed. So that sort of where we're at with the sustaining capital. It's a little lower, little light in the first quarter but it will pick up in the next several quarters.

Heiko Ihle

Right. Those year-over-year numbers I just gave you?

Tom Yip

Well, they are just sort of different, they are just different programs Heiko between last year and this year.

Heiko Ihle

Got it. Perfect. Thank you guys. I'll get back in queue.

Jacques Perron

Thanks Heiko.

Operator

Our next question comes from Mark Mihaljevic of RBC Capital Markets. Please go ahead.

Mark Mihaljevic

Hi, thanks. Good morning everyone and congrats and good luck Jacques in the new role. I guess my first one again you guys mentioned a focus on preserving near term liquidity over the elective debt repayments. Are there any other initiatives you're looking at from a liquidity perspective? Obviously you've got fully drawn the revolver now. So are you looking at anything else beyond that or is it just the fact that you're going to preserve cash and not make any elective payments on the debt? How should we be thinking about that?

Jacques Perron

Mark, thank you for your question. That's a good one. So right now I was happy to see before my arrival that the company made the decision to draw down the $16 million. I think that was a very prudent decision in the current circumstances. I don't see in the immediate need for any additional decisions. However, as we all know this COVID pandemic is very unpredictable and very difficult to understand exactly what's going to happen and when we're going to return to the new normal.

So what I want to do with the finance team is to look at what are the potential alternatives. We're not planning to do anything drastic at this time but we want to make sure that we are in the position if we have to, to pull levers so we can improve our liquidity again if we will need to. We're not planning anything but what we're doing is we're planning for the worst and hoping for the best and we're going to have alternatives in our back pocket and make sure that if we need to we'll be able to do something, but again I want to say that right now based on our current plan and if the situation remains as it is there is no reason for us to panic at this time. There is no reason to do anything drastic but we just want to be prepared in case that we have to do something.

Mark Mihaljevic

Perfect and that's a prudent approach to be taking here and then I guess kind of following to that question and appreciate it might be a little bit early for you to be in a position to answer this but as you started to think of the longer term capital structure, would you continue the previous trend of trying to just be in a normal world without COVID, would you be trying to just delever the balance sheet as quickly as possible or would you be more inclined to maybe firming it out, giving yourself a little more discretionary capital to invest in the business or pursue other opportunities?

Jacques Perron

Well, another good question Mark. I want to continue to reduce the debt but no it's a balancing act all the time between our capital needs and what we want to do and what we want to achieve but definitely the objective of reducing the debt the objective that the company had before continues to be there and again we're going to balance this with all the other requirements but everything being equal and as you said if we forget about COVID we would like to see a reduction, a significant reduction of the debt in the coming years and fortunately for us we're generating significant cash flow. So we have the ability to do that and be able to have at the same time sufficient resources to continue to grow the business.

Mark Mihaljevic

Okay. That's fair and then one more for me. I guess you guys mentioned some cost pressures from all the initiatives you've implemented. Can you, kind of quantify that either on a absolute basis or in dollar per tonne basis and then how long would you think the current situation could persist before it'd be starting to pressure your full year all in cost guidance?

Jacques Perron

Tom could you answer that please?

Tom Yip

Well, we have said that it's been a minimal impact because the pandemic really came upon us in the month of March. So in the first quarter we saw very minimal. Going forward we think there's a modest increase but we're well within the guidance that we set out earlier this year and part of that is because we've got a favorable Canadian dollar FX impact when we compared what we did for the budget and the forecast vis-à-vis what we're seeing today. So I guess all I could conclude is that we're well within the cost guidance at this point in time.

Mark Mihaljevic

Okay. Perfect. That's it for me. Thanks guys.

Jacques Perron

Thank you Mark.

Tom Yip

Thanks Mark.

Operator

Our next question comes from Joseph Reagor of Roth Capital. Please go ahead.

Joseph Reagor

Hi guys. Thanks for taking the questions and welcome aboard Jacques.

Jacques Perron

Thank you.

Joseph Reagor

Can you guys hear?

Jacques Perron

Yes.

Joseph Reagor

So hopefully I'm not too redundant in this but I'm going to try to ask it slightly different way. Can you guys quantify kind of on a monthly basis with the COVID-19 additional measures costs you may be on a total dollar basis?

Jacques Perron

Yes Tom. Could you give some general guidelines, general answer on this?

Tom Yip

Well, it's legacy. It's still within the guidance. What we are seeing is the cost increases would be a little bit on a shift change. So there's a bit of overtime. We've kept most of the staff on onboard. We've changed business for our transportation. So we got more and more buses in place. Normally, I'll say that this is approximately about[ $2 million Canadian] a month.

Joseph Reagor

Okay. That's very helpful. And then shifting gears a bit. So the grade for Q1 was kind of towards the lower end of the scale but within it for the year. Do you guys have some idea kind of as far as expectations on a quarterly basis over the remainder of the year? Is there a specific quarter you're expecting better than the others or is it just kind of a flat guide as call it low 8 grams per ton the rest of the year?

Jacques Perron

Joseph that's a very good question. As we said our grade is going to be within a range that's part of our guidance note the range of the grade. I think everybody needs to understand that the Brucejack deposit is a very unique geological context. I'm sure you all know that. It's a very different geology. It is going to continue to be variable. My understanding is that there has been a lot of progress to understand the geology and the grade distribution but it's not perfect yet.

So we're going to continue to see variation from quarter to quarter. That's going to continue but so far our plan for this year and from what I've been able to look at and discuss with the team is within the range that was disclosed and it's going to be within that range and there's going to be ups and there's going to be downs and it's going to move a little bit around and I think everybody needs to understand that this mine is not like other gold mines where you can dial in the grade and be fairly consistent quarter after quarter, year after year. This is going to be a little different.

The objective that I have and that the team has is to be able over time to reduce that volatility, to reduce the range of grades in which we're going to be operating but there will always be volatility with that deposit. We'll never be able to say, it's going to be X and it's going to be X every quarter and the flat for the balance of the year. We continue to expect that some quarters will be higher than Q1 and some quarters maybe closer to Q1 but it's going to be within that range from what we can see right now.

Joseph Reagor

All right. Thanks for the detail there. And one last one. Obviously, you guys expressed that you think you can catch up for the COVID-19 related impacts for drilling and development but could you guys kind of give us an idea of like how long the catch-up time might be like per month of time that you lose for COVID-19 for development and drilling like how many months it'll take to kick that back up?

Jacques Perron

Yes. Thank you Joseph. Dave could you give a little bit of an answer on that one?

David Prins

Yes I can definitely. Obviously I'll start with the resource drilling. That's on hold right now, full stop. So when we get back into drilling again which hopefully we're thinking in July now but again will be depending when the restrictions are lifted, we didn't have a lot of meters program this year. So I don't see any issues with the meters. We had budgeted that we'll get those by the end of the year.

In regard to our RC, we have started RC and we showed in Toronto at the technical session that we had phase one and two phase one 14,400 meters we are 3000-3500 into that already with the drill we have on site. So it's not literally stopped there RC. We just haven't started the other two drills that we have on site waiting to decommission.

So I believe even with one drill running from – at the end of the RC program with the phases one and two we showed we still get those done. We also stated that we had a 100,000 meters, approximately 100,000 meters budget of RC. If that doesn't happen this year it won't impact this year's production. That will be pushed off to next year. It may be different drills because we'll have to start mining in those areas towards the end of the year.

So we'll just push those out to next year but it won't impact this year's production. And then in relation to the development as I stated before the developed meters we're losing our longer-term development for the longer term resource drilling. So those won't impact the near-term production but I do hope as I said here now that we should be able to catch those up by the end of the year. That's where pushing the team for. They'll all depend and as I mentioned we're back up to full resources now and we're achieving our daily goals and exceeding them. So just depending if we have another COVID impact or not. I hope that answers your question. Thank you.

Joseph Reagor

Yes. Great. Thanks. I'll turn it over guys.

Jacques Perron

Thank You Joseph.

Operator

Our next question comes from Adam Graf of B. Riley. Please go ahead.

Adam Graf

Hey Tom, Jacques and Richard thanks for taking my question. Most of my questions have been asked but just super quick here. Maybe you can remind us of the quarterly debt required, that's required to be repaid for the rest of the year?

Jacques Perron

Yes Tom do you want to take that one?

Tom Yip

Sure. Thanks Adam. Our quarterly payments are $16.7 million and that's every quarter for the duration till the end of 2022.

Adam Graf

And on a slightly different subject, can you guys just remind us of the payable rate you guys get on the concentrates?

David Prins

Tom?

Tom Yip

We get approximately 92%, I believe plus or minus.

Adam Graf

And have you guys been able to make any progress on recovering more to dore versus concentrate?

Jacques Perron

Yes. Dave can answer this one.

David Prins

Yes. Hi Adam. As you know gravity recovery at Brucejack is exceptional and exceeding 60% which in the feasibility study were around about 50% level. So we are pushing that circuit. So yes, I don't expect it to get a lot more out of it but it's running pretty much at max there isn't sweet maximum. There is some tweaking we could do once we get some other things sorted out but I don't see that happening in the very near term and it's only a very minor adjustment that will increases that we would expect to get out of that obviously because of the high overall recovery we're getting in any case. I will hand the question back.

Adam Graf

All right. Great. Thank you guys. Appreciate it.

Jacques Perron

Thank you Adam.

Operator

Our next question comes from Andrew Mikitchook of BMO Capital markets. Please go ahead.

Andrew Mikitchook

Thank you. A lot of great questions already been asked. Maybe Jacques, I will just ask a slightly unfair question but maybe post this COVID, do you think that we should kind of expect under your guidance a bit of a revision on for lack of a better word the mine plan or our priorities and expectations that you guys are delivering to the market and all those things being equal that be kind of later this year you'd expect that?

Jacques Perron

Good morning Andrew. Thanks for the question. At this time Andrew it's a bit early for me to tell you if I think or not there's going to be a need for a revision. In the past months I was able to spend before taking the job, I was able to spend a lot of time looking at data and information and reports and whatnot and I believe the current 43-101, the current plan is a good plan, makes sense. I am sure, I am 100% sure that once we start to dive into the details as you know Andrew these 43-101s they're done at a certain point in time and you get new information and you learn new things and you always come up at some point you have to issue another one to adjusting. So I am sure there's going to be some adjustments but again at this time I don't see any reason why I would expect to put out a significant change towards the end of the year or next year or that's not in my plan right now but like I said you never know what's going to happen but nothing on the horizon at this time.

Andrew Mikitchook

Okay and just one question maybe for Tom I guess. Just to be clear, I think you used the word that there was very negligible impact in Q1 from COVID precautions and costs. Obviously does that imply based on some of the other commentary and responses that there would be a more substantial impact in Q2 at this point in time? Is that a fair expectation?

Jacques Perron

Tom?

Tom Yip

Yes. I think that's correct and I think I just said that we're sort of normally about 2 million Canadian on a monthly basis and it just depends how long these restrictions are going to be in place. So I think I'll leave at that.

Jacques Perron

Great. Thank you very much for that. And I will pass the questions over the next person.

Operator

Our next question comes from Anita Soni of RBC World Markets. Please go ahead.

Anita Soni

Hi, good morning guys. So Andrew kind of covered off the two questions that I felt had not yet been asked but I will ask another couple. Just in terms of the trajectory of the grade I know you talked about the volatility. I think we all understand that is a very volatile mine in terms of grade but can you just give us a bit of a roadmap on how your development work has an impact on grade if it does at all?

Jacques Perron

Dave do you want to answer that one

David Prins

Yes. Hi, you made a good question. Yes. We have our mine plans set out pretty much from last year. We bring other states in as we get more information about avail along. I mean if say obviously meeting several constraints and grade is one of those. We have all of the stopes in this year's mine plan are at the highest confidence that we could gather together within the sequencing that we could mind too. So I think there's no issues there and also I previously stated that the development constraints or reductions aren't going to hurt us in our mine plan in the short term. So I hope that answers your question on that.

Anita Soni

Okay. Yes, it does and then secondly in terms of the discretionary debt repayments Tom could you tell me which one of your, what you're referring to there and which ones are discretionary and what isn't?

Jacques Perron

Tom?

Tom Yip

Sure Anita. What we have set out at the beginning of the year was related to the free cash flow that we were generating and that was what I was referring to as discretionary pre-payments on our revolver. So we said that we would have about $150 million to $230 million or approximately [$100 million to $170 million] of free cash flow and that was going to be directed at debt repayments but we said that a year before this COVID-19 came upon us. So that's what I was referring. It's just use of free cash flow

Anita Soni

Okay. Just so I'm clear, I'm just wondering if your, do you have to apply for relief to your debt holders to not pay or are you free not to pay right now?

Tom Yip

On the revolver there is no, yes there is no requirement to pay any of that now.

Anita Soni

Okay. And then lastly, I guess my question I guess comes back to the taxes that were adjusted out. Could you give us an idea what more normalized deferred tax number would be? I see in your notation that the taxes were basically about $18 million bucks and I think one or two with cash taxes and the rest was kind of was excluded in your adjusted number but it seems like only about $8 million was related to the kinds of fluctuations you're talking about revaluation. So is it fair to say that the remaining amount maybe another $8 million would be more normalized deferred tax number?

Tom Yip

I would generally, for planning purposes use our deferred tax rate at about 36.5%, 37% approximately. The fluctuations would be really based on things that are sort of beyond our control and just occurs when we have changes in FX rates or changes in share prices that affect our stock based compensation. So I guess that's sort of the way I would look at it.

Anita Soni

Okay. All right. Sounds good. Thank you. Thanks so much. Thanks for the questions.

Jacques Perron

Thank you Anita.

Operator

Our next question comes from John Tumazos from John Tumazos Very Independent Research. Please go ahead.

John Tumazos

Congratulations Jack.

Jacques Perron

Thank you John.

John Tumazos

-- to instituting a dividend where a penny would be just under 2 million US and nickel would be 9 million it's not big money. Gold's up $400 and second question are there any policies that you're revaluating that you don't want to own from the predecessors? We heard you earlier dancing a little bit about ore grade for example.

Jacques Perron

So first part of your question John on the dividend front at this point in the current situation I don't have any plans to even think about dividends. I don't think it would be the right thing to do. We still have a lot of debt on the balance sheet. We need to continue to grow this business. So for the time being that's not on my radar. However, that's a board decision. It's not the CEO decision. It's a board decision. So we'll know if we have, I am sure there's going to be, we're going to have discussions but if you want my point of view it's not, like I said it's not on my radar right now and in regards to policy, yes John in the next months that's I want it like I said earlier I want to learn the business. I'm going to spend a lot of time. The month of May will be a time meeting the team and spending time at site. I want to go at sites for a good 7 to 14 days at sites in the month of May. So that's going to be number one for me, number one priority and then the month of June, I'll be looking at all these other things and policies and whatnot and come up to the conclusion on what we need to adjust, what we need to keep, what we need to change and then like I said in the month of July put the plan together and see how we're going to approach all these things going forward.

Operator

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

Jacques Perron

Thank you. As we all know we were living in very challenging times. However, the Pretium team has done an excellent job, managing the business in this unprecedented situation and we will continue to do everything we can to minimize the impact of the pandemic on our operations. I'm excited with the potential of our company and look forward to work with the team to create value for all our stakeholders. Thank you everyone for dialing in into our earnings call this morning. We appreciate your comments and your questions. Stay safe, stay healthy and wash your hands. And have a great weekend everyone. Bye now.

Operator

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