Premier Gold Reports Best Operational Quarter
THUNDER BAY, ON - Premier Gold Mines Limited reported operating and financial results for the three months ended September 30, 2020. Significantly improved production costs at Mercedes were realized, and when combined with continued strong production from South Arturo, has resulted in the Company's best operational quarter in 2020. "With a focus on achieving operating margins, the revised mine plan implemented at Mercedes has exceeded our expectations since the mine resumed operations late in the second quarter," stated Ewan Downie, President & CEO. In addition, Nevada Gold Mines continues to over-deliver at South Arturo with year-to-date production now having surpassed the annual production plan, and the strong drill results from El Nino at depth suggest further potential to expand resources and mine life."
A total of 42,359 ounces of gold and 103,974 ounces of silver were produced for the nine months ended September 30, 2020 compared to 50,547 ounces of gold and 147,328 ounces of silver for the prior year period. The Company reported total revenue of $68 million and mine operating income of $15.6 million for the nine months ended September 30, 2020 compared to revenue of $64.9 million and mine operating income of $2.6 million for the prior year period. The reduction in production, when compared to the prior year period is due to the impact of the COVID-19 pandemic which resulted in no gold produced at Mercedes during the second quarter due to a government mandate that suspended all mining operations. The increase in revenue and mine operating income during the quarter is attributable to the increase in the average gold selling price of $345 per ounce of gold sold and the reduction of operating unit costs at the Mercedes mine in Q3 2020.
The Mercedes mine is located 150 kilometers northeast of the city of Hermosillo in the state of Sonora, Mexico. Significant progress has been made with respect to cost reduction initiatives at the mine primarily due to lower unit mining costs resulting from a reduction in fixed costs for labour and contractors as the workforce was downsized to align with the new mine plan. The result was co-product cash costs per ounce of gold sold of $608 (a 44% reduction vs Q3 2019) and co-product all-in sustaining costs per ounce of gold sold of $885 in Q3 (a 35% reduction vs Q3 2019), the lowest cost quarter of 2020. Although the grade had a positive impact on the cost per ounce, the primary driver of the overall improvement was the reduction in mine unit cost per tonne processed.
As previously announced, Mercedes was placed into care and maintenance during the second quarter as mandated to help protect the health of our employees, their families, and neighboring communities from the growing threat of the COVID-19 pandemic. Extensive technical work was carried out during the two-month shutdown to assess alternative mine plans with renewed attention to increasing profit margins. As a result, a new simplified operating plan with a more focused mining and development strategy was implemented when operations resumed late in the second quarter. The outcome is enhanced productivity and reduced costs, which is ensuring the mine's ability to reliably deliver cash flow.
A phased re-start of the mine in June began with limited mining activities and the stockpiling of ore to ensure the safe and successful implementation of the plan and meet sanitation requirements necessitated by our COVID-19 protocols. Processing commenced on a batch milling basis in early July. The initial focus of the phased approach prioritizes completion of key access ramps to the Diluvio West and Lupita Extension stoping areas, delineation/definition drilling at Marianas and Diluvio West, and San Martin delineation drilling. During the third quarter operations were not affected by the pandemic and were executed according to the revised plan.
Mercedes mined a total of 106,597 tonnes during Q3 as compared to 163,030 tonnes during the prior year period as a result of focusing all mining activities on two production areas (Diluvio and Lupita) instead of six areas previously. This change had a several positive impact, with a considerable reduction waste tonnage, a 15% increase in the average gold grade from 2.94 g/t in Q3 2019 to 3.37 g/t, and a significant decrease in the costs per ounce sold.