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Pretium Resources Inc (NYSE:PVG)
Q2 2020 Earnings Call
Aug 7, 2020, 11:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Thank you all for joining us this morning. Welcome to the Pretium Resources Second Quarter 2020 Conference Call.

[Operator Instructions]

The conference call today is being webcast live and available along with the presentation slides on Pretium's website at pretivm.com. I would now like to turn the call over to Mr. Jacques Perron, Pretium's President and CEO. Please go ahead.

Jacques Perron -- President, Chief Executive Officer and Director

Thank you. Good morning everyone. Welcome to our second quarter 2020 operating and financial results call. It is with a very heavy heart that I'm speaking to you today after a tragic loss of one of our employees this past weekend at Brucejack. Our thoughts are with the employee's family and loved ones, and also with every member of the Pretium family. The isolated incident occurred during maintenance at the support facility on the surface. We are fully cooperating with authorities and the investigation of the incident.

The safety and well being of our employees is my most important priority. Although this was an isolated incident, it reminds us of the critical importance of safety in all aspects of mine site operations.

On today's call, I will comment on our operational highlights for the quarter, the current status of our COVID response and our progress returning back to normal operations. Joining me on the call today is our CFO, Tom Yip, who will review the financial highlights of the second quarter. Following that, I will provide an update on our exploration plan for this year. At the end of my prepared remarks, Dave Prins, our Vice President, Operations, will join the call for one last time to address your questions on the results from the second quarter.

Before I discuss this quarter's performance, I would like to emphasize that no quarter at Pretium is considered a success, unless it is accomplished safely. With that in mind, I would like to acknowledge our hard working and dedicated team. And despite the additional challenges presented by the COVID pandemic, we came through with solid gold production this quarter and record high free cash flow.

Before we begin, note that our statements contain forward-looking information and future-oriented financial information based on certain assumptions. I refer you to the cautionary language included in our news release as well as the management discussion and analysis for the same period. These are available on our website and have been filed on SEDAR. Please note all dollar amounts mentioned on this call are in U.S. dollars, unless otherwise noted.

The Brucejack Mine continues to be profitable. In the second quarter, we produced more than 90,000 ounces of gold, keeping us on track to achieve our annual production guidance. We generated record high free cash flow of $82.7 million and ended the quarter with a healthy cash balance of $124.7 million.

Operations have continued through the COVID-19 pandemic under the guidance and directives provided by the authorities. We have taken significant steps to mitigate the spread of COVID-19 and to protect our staff, their families and communities. COVID-19 did not have a direct impact on second quarter gold production, though certain mine site activities were delayed. There were no interruptions to the supply chain and increased inventory levels have been established. We continue to monitor the situation and will continue to evaluate the potential for longer-term impacts to mine production.

During the quarter, as a precautionary measure to increase available liquidity, the company drew down $16 million of the revolving portion of the loan facility. The Brucejack Mine achieved a major milestone early in the quarter with a production of its 1 million ounces of gold. The production of 1 million ounces of gold in less than three years since start-up is a significant achievement for the Pretium team, many of whom have been with the project since exploration and construction. We are working to continue the successful operations at Brucejack for the benefit of our shareholders, employees and the communities in Northern British Columbia.

Subsequent to the end of the quarter, we were pleased to announce that Patrick Godin has joined Pretium as Vice President and Chief Operating Officer. Patrick's career of more than 25 years in the global mining industry includes exceptional leadership roles, as well as extensive experience in technical and operational roles. I have personally known Patrick for over 20 years and I'm delighted to have him on our team. We look forward to working with Patrick as his broad knowledge of the mining business and technical experience will be instrumental as we continue to drive Pretium's success.

Turning to operations on Slide 8. In the second quarter, a total of approximately 327,000 tonnes of ore were processed, equivalent to a throughput rate of 3,596 tonnes per day. During the quarter, the mill operated below the permitted level of 3,800 tonnes per day due to scheduled and unscheduled maintenance, focused on lateral development and stope availability. The mill feed grade averaged 8.9 grams per tonne gold for the second quarter of 2020, above the estimated 2020 guidance range. Over the quarter, approximately 353,000 wet tonnes of ore were mined. We continued our lateral development at a targeted rate of approximately 1,000 meter per month.

Over the first half of the year, we produced approximately 173,000 ounces of gold and we continue to expect to meet our full-year 2020 gold production guidance of 325,000 ounces of gold to 365,000 ounces of gold. For the remainder of 2020, production is planned to continue at an average rate of approximately 3,500 tonnes per day, due to planned shutdowns and an increased focus on waste management from accelerated lateral development. The average annual gold rate is expected to range between 7.6 grams per tonne and 8.5 grams per tonne at an average gold recovery of 97%.

All-in sustaining costs were $950 per ounce of gold sold for the first half of 2020. Annual financial guidance has been updated to include costs for COVID-19 protocols, which are expected to remain in place for the remainder of 2020, as well as additional diamond drilling costs. Accordingly, we have adjusted our AISC guidance upwards by about $55 per ounce to a range of $960 per ounce of gold sold to $1,120 per ounce of gold sold.

Free cash flow for the first half of 2020 was $124.6 million and already reaching our full-year forecast of $100 million to $170 million. With improved gold prices, our free cash flow forecasts for 2020 has been increased to a range of $205 million to $275 million, based on an average gold price of $1,800 per ounce.

Foreseeable 2020 production guidance remains achievable, assuming there is no significant impact on operations at the Brucejack Mine due to the COVID-19 pandemic. We outlined a number of initiatives we believe will help us optimize our stope design and improve overall performance. Our first priority remains increasing mine access. As we progress through 2020 lateral development, we will continue to focus on opening the mine. The increased development will improve access to reserves and enhance opportunities to blend material from multiple areas, supporting more consistent production. These efforts will benefit from scaling back our mill throughput to 3,500 tonnes per day on average for the remainder of the year.

Moving to Slide 12. A reverse circulation drill program started earlier this year to increase the data density to enhance mine planning, improve stope design and ultimately optimize gold production. As a result of COVID-19 related restrictions, the RC drilling program was delayed. The program was introduced in staggered phases with the first drilling operation at the beginning of the second quarter. As the equipment and personnel became available, a second and third RC drill were commissioned and commenced drilling toward the end of the quarter. A total of approximately 22,000 meters of RC drilling were completed during the quarter.

Infill drilling to improve reserve definition ahead of mining was put on hold at the onset of the COVID-19 pandemic at the end of the first quarter in order to limit non-essential personnel at Brucejack. By the end of the second quarter, diamond drilling activity had resumed with four diamond drills on site, targeting reserves proximal to mine infrastructure to build stope inventory and provide flexibility for near-term mining. Infill diamond drilling in the second half of 2020 is planned to progress west toward the Brucejack Fault Zone and intended to support mining in the first quarter of 2021.

Now I'll turn the call over to Tom to review our financial performance for the second quarter of 2020.

Tom S.Q. Yip -- Executive Vice President and Chief Financial Officer

Thanks, Jacques, and good morning everybody. We continued our track record of positive cash flows and profitability again this quarter as we have every quarter, since achieving commercial production on July 1 of 2017. For the quarter, we realized a gold price of $1,738 per ounce, an increase of 32% over the second quarter of 2019. With additional ounces of gold sold, we saw a 101% increase in earnings from mine operations and 170% increase in adjusted earnings. The robust gold environment enabled us to generate strong free cash flows, which increased 141% over last year's second quarter.

Turning to Slide 16. During the quarter, we sold 96,047 ounces of gold compared to 85,953 ounces of gold in 2019. Despite comparable gold production for the quarters, there was a difference in sold ounces due to the timing of production and subsequent sales. The $419 per ounce increase in average realized gold price contributed to the 47% increase in total revenues of $166.6 million versus $113.2 million in 2019. Production costs increased $23 to $196 per tonne mill compared to the second quarter of 2019. The increase was primarily due to the COVID-19 protocols that were implemented in March, impacting employee salaries and travel costs, and costs associated with the departure of a senior executive. These two discrete items account for $20 per tonne.

Turning to Slide 18. Our cost of sales, which includes production cash costs, depreciation and depletion, royalties and selling costs, averaged $1,109 per ounce sold for the quarter versus $970 for 2019. Depreciation and depletion expense increased in the quarter by approximately $100 per ounce as a result of the updated reserves we reported in March of 2020. The total cash cost averaged $749 per ounce sold for the quarter versus $702 for 2019, reflecting the incremental cost of COVID-19.

We continued to show robust earnings from mine operations of $60 million in the second quarter compared to $29.8 million in 2019. After deducting our corporate G&A costs, we generated operating earnings for the quarter of $55.2 million compared to $25.5 million in 2019. We had lower interest and finance expense of $4.7 million compared to $8.8 million in Q2 2019, due to the lower outstanding loan balance and a lower LIBOR rate throughout the period. Lastly, we incurred $17.9 million of taxes during the quarter, consisting of $1.6 million of cash taxes related to the BC Mineral Tax and $16.3 million related to deferred taxes. This significant increase in our deferred taxes compared to 2019 is due to more ounces of gold sold at higher prices.

Our effective tax rate continues to be impacted by the translation of our Canadian-denominated BC Mineral Tax pools. As we have reported in the past, we currently pay BC Mineral Taxes at the minimal rate of 2%, not 13%, as we draw down our significant tax pools. Based on the updated life of mine and current gold prices, we do not anticipate any cash taxes for federal and provincial income taxes for three years to four years. Thereafter, anticipate paying taxes at a rate of 36.5% on mine operating earnings.

Net earnings for the quarter were $32.3 million or $0.18 per share versus $10.4 million or $0.06 per share for 2019. The adjusted earnings items we believe are not reflective of the underlying operations of the company. These are non-cash items consisting primarily of deferred income taxes and accretion on convertible notes. The adjusted earnings were $49.2 million or $0.26 per share for the quarter compared to $17 million or $0.09 a share in the second quarter of 2019.

Turning to Slide 21. For the quarter, we generated a record $92.1 million of cash flow from operations. This continues our trend of positive cash flows from operations since start-up in mid-2017. After deducting cash used in investing activities, we generated $82.7 million of free cash flow or $0.44 per share. We began the quarter with $40.6 million, generated $92.1 million of operating cash flow, drew $16 million on our revolver and received $6.1 million from stock option exercises. This was offset by $19 million of debt service and $9.7 million spent on capital expenditures. We ended the quarter with $124.7 million in cash.

On Slide 23, we show more details on our all-in sustaining costs. For the first half of 2020, we sold 176,508 ounces, tracking within our guidance range for the year. AISC totaled $167.7 million for the six months, which included $4.7 million for additional employee salaries and travel costs related to the COVID-19 protocols in the second quarter. AISC was $950 per ounce of gold sold for the first half of 2020. AISC guidance for the full year has been updated to include costs of continued COVID protocols to the end of 2020 in cash costs and additional infill drilling in sustaining capex. The AISC guidance increased to a range of $960 to $1,120 per ounce of gold sold. The increase of $50 to $60 per ounce is due to COVID-related costs of approximately $40 per ounce and increased drilling accounts for approximately $20 per ounce.

Free cash flow for the first half of 2020 was $124.6 million at an average realized price of $1,677 per ounce. With improved gold prices, free cash flow guidance for the full year has been increased by $105 million to a range of $205 million to $275 million based on a gold price of $1,800 per ounce for the rest of the year compared to the original guidance using a gold price of $1,450 per ounce. We continue to benefit from the high gold prices and we will focus on preserving liquidity, while we operate under the COVID-19 uncertainties.

Now back to you, Jacques.

Jacques Perron -- President, Chief Executive Officer and Director

Thanks, Tom. In addition to infill drilling and RC drilling of the defined mineral reserves, we plan to drill 25,000 meters of resource expansion drilling. Resource expansion drilling is expected to expand the current mineral resources at the Valley of the Kings, adding gold ounces to the life of mine. There is opportunity to expand beyond the currently defined mineral resource shell, where previous drill programs have indicated the continuation of high-grade gold mineralization.

Here on Slide 25 is a section view looking east at the underground development. The new diamond drilling, highlighted with the blue drill lines, is planned to continue to the north, toward the West Zone and will target Inferred Resources and previously intersected mineralization outside of the current mineral resource shell. Stepping further out, we have over 12,000 square kilometers of mineral claims in the Golden Triangle in BC. The Brucejack Mine is at the top left of the property. The 2020 regional exploration program on the company's Bowser Claims is currently under way with crew and equipment mobilized to site. The exploration program is evaluating several distinct zones that have the potential to host Eskay Creek-style VMS deposits and high-grade epithermal related gold systems.

The primary focus of the 2020 program is the A6 Zone, located approximately 14 kilometers northeast of Brucejack. The assays received from drilling the A6 Zone in 2019 showed high-grade silver plus copper. To follow up on the encouraging results of the 2019 program, 10,000 meters of drilling is planned. The 2020 program will also include about 3,500 meters of drilling at the Koopa Zone, the Hanging Glacier Zone, and the East Snowfield Zone.

The grassroots exploration program will continue through the summer and will also include soil sampling, prospecting and regional mapping. We believe the best value for our shareholders is to continue to invest a portion of our cash flow in exploration at our existing claim package.

Before opening the lines for questions, let me review the highlights of the second quarter. We continued to capitalize on the favorable gold environment with adjusted earnings of $49.2 million, equivalent to $0.26 per share. We generated a record high free cash flow of $82.7 million and we ended the quarter with a healthy cash position of $124.7 million. To sum up, we have successfully navigated an unusual quarter. And at this time, we remain on track to achieve our 2020 production and revised 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 questions. Ariel?

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Heiko Ihle of H.C. Wainwright. Please go ahead.

Heiko F. Ihle -- H.C. Wainwright -- Analyst

Hey guys, thanks for taking my question. Great quarter. Nice to see the stock up 25%. Nice to see the current gold price environment here.

Jacques Perron -- President, Chief Executive Officer and Director

Yes, Heiko. We would agree. It's a good time to be in the gold business.

Heiko F. Ihle -- H.C. Wainwright -- Analyst

Yes, it is. Speaking of current gold pricing, have you seen the pressures in regards to labor supplies at this point? Are you hearing anything cost wise, the bushes gruelling in the distance yet? Anything that maybe you can provide a little bit of color on?

Jacques Perron -- President, Chief Executive Officer and Director

Heiko. No, at this time, we haven't heard anything specific on that front. The only increase we have seen to our costs as Tom mentioned is that -- related to COVID, and the fact that we're accelerating drilling, but nothing else.

Heiko F. Ihle -- H.C. Wainwright -- Analyst

And building on what you just said, I mean, just going by your full year production guidance there and the revised all-in sustaining cost guidance, you're going to produce an awful lot of cash this year, which is a wonderful problem to have obviously. I mean at what point, should we expect Pretivm to return some excess amounts of that to shareholders via buyback, a dividend? Or should we more expect to see an acquisition? Is there a gold price where you think you might even experience something like that already this year?

Jacques Perron -- President, Chief Executive Officer and Director

I think as we mentioned, and in particular, Tom mentioned this, we continue to want to be careful and ensure that we have sufficient liquidity in case we would have an outbreak due to the COVID pandemic. So we're being very careful right now. We're also starting to look at our plans for 2021. We're going to be working on that. We still have some infrastructure work to do around Brucejack, there's still some construction work to be done. We're looking at different investments to optimize, improve costs like electric equipment and other things.

So definitely, in the second half of this year, we're going to have -- it's time now to start to work on our budget for next year. And we've been having discussion internally and at the Board level, with this gold price, if it stays where it is, you're correct, Heiko, we're going to be generating a lot of cash. And we want to do the best we can for the shareholders. And we'll analyze all opportunities and decide what is the most efficient way of use of our cash.

There's probably some debt that we want to deal with at some point because we still have significant amount of debt on the balance sheet. And as I mentioned to others in the past, I would prefer to have less debt on the balance sheet. So there's a bunch of different competing demands for our cash and we'll be balancing all those in the coming months. And we'll probably be able to give you some more color on what we expect to do at the end of the third quarter or definitely at the beginning of next year.

Heiko F. Ihle -- H.C. Wainwright -- Analyst

So I'll take that to mean, yes, you are cognizant of it. And yes, there probably is a price where things may happen and you might tell us about it next quarter when this COVID thing, hopefully, is not as prevalent anymore. Would that be fair?

Jacques Perron -- President, Chief Executive Officer and Director

That would be fair, Heiko. But unfortunately, I think we're going to have COVID in our backyard for a while. I don't think next quarter, it's going to be resolved. But hopefully, we're going to have a scientific breakthrough here. Like I said, we're preparing for the worst and hoping for the best.

Heiko F. Ihle -- H.C. Wainwright -- Analyst

That's a good strategy in life. Thank you very much and keep doing what you did this quarter.

Jacques Perron -- President, Chief Executive Officer and Director

Thank you, Heiko.

Heiko F. Ihle -- H.C. Wainwright -- Analyst

Take care.

Operator

Our next question comes from Ovais Habib of Scotiabank. Please go ahead.

Ovais Habib -- Scotia Capital Inc -- Analyst

Thanks operator. Hi, Jacques and team. And congrats on a great quarter. And thanks for taking my questions. So Jacques, just starting off now, you've been with Pretivm now for about four months and I believe you had a chance to get down to site as well. Can you provide us with any thoughts you have on current operations and/or improvements that you are looking at to bring over the next coming months?

Jacques Perron -- President, Chief Executive Officer and Director

Yes. Thank you, Ovais. Yes, I was at site -- since I started, I was at site three times and I'm going back on Monday. I'm taking Patrick Godin with me next week and we're going to be at site to do a very extensive visit there. So I've spent quite a bit of time. And as I mentioned in the past, I think the highlights of my initial visits are the quality of the infrastructure, in particular, [Indecipherable] is a very good mill. It can produce a lot of tonnes and the recoveries are good and things are going well on the processing side of things. I was very impressed with how the team is managing the road on the glacier. I think it's the first time I do have to deal with a road and a glacier. and it's definitely a significant challenge, so a good job being done by the team there. Environmental social license to operate, that's very, very well done.

The definite challenge at the Brucejack is the underground knowledge of the ore zone. So that's why we have decided to accelerate diamond drilling. We need to do more work to understand the geology. That's going to be an area of focus. Another area of focus is optimize productivity at the mine. There is ways to improve how we're doing. And one of the main target that I have is to increase lateral development, increase stope availability and advance our knowledge of the ore zones to be better prepared for planning and better prepared for optimizing the mine sequence. So that's -- those are the areas we're going to be focusing on.

But I'd like to point out that due to the tragic event we experienced last weekend, one significant area of focus that I already had, but we're going to step it up a notch here, is on the safety side of things. We're not in the business of injuring people, and we're going to be spending a lot of time and effort in the coming months to get back on track to make sure that we do everything very well, in a profitable manner, but first and foremost, very safely.

Ovais Habib -- Scotia Capital Inc -- Analyst

Thank you for that by the way. And just on that, I mean, in terms of underground development, I mean you guys are at around 1,000 meters per month. Grade control drilling, I believe you did about 2,000 meters of drilling in Q2. Is that enough? Do you see that you need to do a lot more development or a lot more grade control drilling to get -- manage on dilution and stope availability and all that good stuff?

Jacques Perron -- President, Chief Executive Officer and Director

Yes. I think we would like to see our development to be anywhere 10% to 15% -- 10% to 15% higher rate than what we're doing right now. We had very good performance in the month of June and in the month of July. We're very happy to see that we're trending in that direction, so we want to keep it up there. And on the drilling side, we want to continue to -- as we develop the -- one of the challenges that we have, Ovais, because of the development -- we have to catch up on development. We don't always have available stopes to go and production-drill them. As we open up new areas, we are going to continue to accelerate our production drilling to build up inventory. And we believe we're going to be in a much better position by the end of Q2, beginning of Q3 next year.

Ovais Habib -- Scotia Capital Inc -- Analyst

Okay. That's great Jack. I will leave it at there and may be I will let other participants ask questions as well. Thanks.

Jacques Perron -- President, Chief Executive Officer and Director

Thank you.

Operator

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

Anita Soni -- CIBC Capital Markets -- Analyst

Thank you for taking my questions. Good morning, Jacque. So just following up on Ovais's question with regard to the development. And you just mentioned that by the end of Q2 and beginning of Q3 of 2021, you think you're going to be in a good position to have stope availability ready. I was just trying to get some color on the stopes that you have available. Is the inventory sufficient for next year? We've had some issues in the past where there was some mixed messaging about the availability of stopes, and that's been a concern about actually delivering on your guidance.

Jacques Perron -- President, Chief Executive Officer and Director

Yes. I think right now, Anita, we're in, I would say, a decent position, much better than where we were. And I'll let Dave talk about this, but we're in a much better position than we were last year. But I'd like to see this improve, again, so that's why I think over the next 4 quarters, we're going to intensify our drilling to increase the number of stopes of the -- or the total tonnage of inventory that we have drilled off. But we're not in a bad situation, and we're definitely not where we were.

Dave, do you have few comments?

David Prins -- Vice President Operations, Brucejack Mine

Yes, thanks, Jacques. Good morning, Anita. Yes, we have built up, as Jacques mentioned, since mid-last year, we've -- and on the last call, I did state we're about 170,000 tonnes of inventory in front of us. We now have 186,000 as of the end of June, of which, there's probably 75,000 that is -- can be -- you've got access to go out there and mine it straight away. So we have been building up. We need to keep in mind we've also ramped up tonnage through that period and delivered more tonnes in Q4 last year. H1 this year was always going to be difficult. But I think the field is set, and now we're -- what we see moving forward to build this up with a little more ease than what we've done it prior to. So I think we're in a much better state. Can we do better? Yes, we can.

Anita Soni -- CIBC Capital Markets -- Analyst

Okay. So, just running -- just roughly like 180,000, that's basically about a half of quarter's worth of inventory available, right, by my calculation?

Jacques Perron -- President, Chief Executive Officer and Director

Yes, that's about it, Anita. That's where we are. By the end of the end of Q2, beginning of Q3 next year, I'd like to be about a 2.5 to 3 months of inventory on hand.

Anita Soni -- CIBC Capital Markets -- Analyst

Okay. All right. Second question, I think there was a mention about costs increasing with the departure of a senior executive. Could you just point out, give me a little bit more color on that and point out to me exactly where that's going through? And secondly, somewhat related, the increases that you're talking about with COVID-related costs, can you relate them to the breakout that you have on Slide 23? And I see, overall, there's a $20 million increase, but I'm just trying to parcel out like where did the increased drilling costs go, where did the increased COVID cost go, where did everything -- where did it all parse out into.

Jacques Perron -- President, Chief Executive Officer and Director

Tom?

Tom S.Q. Yip -- Executive Vice President and Chief Financial Officer

Hi, Anita. With respect to your first question, the costs which we disclosed is approximately USD1.6 million. And that's for our VP, Ops. The costs are in mine G&A costs. If you look at the per-tonne slide, that's where that is. With respect to all the COVID increases and the increased drilling, it's in 2 spots. The COVID cost on Slide 23, that's primarily in the cash cost line. And the additional diamond drilling that Jacques spoke about is in the sustaining capital line. And that's why you see that we've moved up those costs by about $8 million on both fronts. So $8 million for the year on cash cost and $8 million on the sustaining capital expenditure line.

Anita Soni -- CIBC Capital Markets -- Analyst

Okay. And then just in terms of the fatality, could you give us a little bit more color on that? I know that you said it was an isolated incident, but just trying to get an understanding of how -- what happened and it doesn't have any future implications at this stage.

Jacques Perron -- President, Chief Executive Officer and Director

Anita, you will understand that we're not in a position to provide any details at this time. The incident is still under investigation. We're conducting our own internal investigation. We have the authorities involved in the investigation, and that's going to take a little bit of time before everything is finalized, and we have correct understanding of everything that had happened. It happened on surface. It's not an underground event. It was not in the mill. It was outside on surface. And like I mentioned earlier, it's a very tragic event for us. We -- it's something that we don't want to repeat. And I'm sure in due time when information is available, we might be able to provide more information. But at this time, we can't comment.

Anita Soni -- CIBC Capital Markets -- Analyst

Okay. And then just going back to the question -- just as I was doing the math, so that's about $5 a tonne on the G&A that we can take off for the departure of the senior executive and assume that's not going to be rolling in going forward?

Tom S.Q. Yip -- Executive Vice President and Chief Financial Officer

We think that as a discrete item, yes.

Anita Soni -- CIBC Capital Markets -- Analyst

Okay. And then just in terms of the drilling that you've done so far, I had a question with regards to the one drill rig, and then you've added two more at the end of the quarter. Is that correct?

Jacques Perron -- President, Chief Executive Officer and Director

Well, that's on the RC drilling side of it.

Anita Soni -- CIBC Capital Markets -- Analyst

Yes, I'm sorry, I'm jumping around there. Yes, on the RC drilling that you've added two more at the end of the quarter. How much drilling do you think that you'll be able to do per quarter on RC drilling with the new amount of rigs? And is that the level of rigs that you'll have going forward?

David Prins -- Vice President Operations, Brucejack Mine

Yes. Anita, it's Dave here. If I could answer that, please. As we stated on the last call and in the Toronto technical presentation, Phase 1 and 2 of the drilling was 27,000 meters. So we're pretty much, as of today, that's obviously done. End of June was 22,000. And we also stated that it was approximately 100,000 meters in this year's budget. So as we currently stand, we -- there's a fourth RC drill rig coming in. It should be commissioned in the next few weeks. So we're on track to drill, by year's end, pretty much to 100 -- very close to 100,000 meters.

Anita Soni -- CIBC Capital Markets -- Analyst

Okay. So ramping up the rate then, I guess, like maybe sort of -- yes, 30,000, 35,000 a quarter, I guess?

Jacques Perron -- President, Chief Executive Officer and Director

We'll be short of 100,000 by the end of the year, whatever the math is on that. That's correct.

Anita Soni -- CIBC Capital Markets -- Analyst

Sure. And I mean, this is for grade control. But does that help you with the block model going forward? Is there any plan to revisit that again next year with the additional drilling information that you have at this stage?

Jacques Perron -- President, Chief Executive Officer and Director

So Anita, I think they -- I'm very happy the company made the decision to go ahead with the RC drilling program to have a higher density of data and get more information because that's what we need to understand this ore body. It has not made any impact on the block model so far because now as you can understand, we haven't been drilling much since the beginning of the year. It's really at -- since end of the -- end of June, that we started to drill in earnest. So we're still in the early stage of this program. We're going to be gathering all the information. We're going to be looking at all this, and we'll determine, probably toward the end of the year or beginning of next year, if we want to maintain asset as is, if we want to make some changes, how can we integrate the data with the block model.

These are all the questions that we have right now. This is a very new process for the company here. This is something new for our team. So we still need to learn how this is going to help us.

We are confident that acquiring additional data will be valuable. But again, it's a bit of an experiment so far, and we need to continue to learn what the information and what type of information we're going to get out of this program and how we're going to integrate that in our modeling and planning and other design activities.

Anita Soni -- CIBC Capital Markets -- Analyst

Yes, understanding this as RC versus diamond drill holes, right? So there's going to be some loss of data...

Jacques Perron -- President, Chief Executive Officer and Director

Yeah.

Anita Soni -- CIBC Capital Markets -- Analyst

-- in the collection of the samples. Okay. Thank you. That's it for me.

Jacques Perron -- President, Chief Executive Officer and Director

Thank you, Anita.

Operator

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

Joseph Reagor -- Roth Capital Partners -- Analyst

Hi, Jacques and team. Thanks for taking the questions and congrats on a great second quarter. I guess first thing, on the grade in the second quarter, 8.9 grams is above the range for the year. Was that a surprise to you guys? Or was that like a mine sequencing thing that you expected this to be the best quarter of the year on a grade basis?

Jacques Perron -- President, Chief Executive Officer and Director

That's a good question, Joe. As I mentioned in the past, and I think everybody told you, we're going to continue to have variability in our grades. And there's quarters that's going to be a little worse than expectation and others that they'd be a little better. I would say the second quarter was not significantly better than what we expected, but a little bit. It was a little better. Maybe in the next quarter will be -- quarters will be a little different.

I want to make sure that we continue to understand that it's not because we had a good second quarter that we have everything under control, and we know everything about the geology. So going forward, we may continue to experience variability. But like I said in the past, I'm much more confident in what we're doing. Dave can add a few words here.

David Prins -- Vice President Operations, Brucejack Mine

Yes, if I could add there. Thanks, Jacques, and Joe, if you go back and have a look at the 43-101 from February and the 2020 mine plan, we're tracking along exceptionally close to it. So yes, there's going to be variability from day-to-day, month-to-month, quarter-to-quarter, but I think that's a point worth noting here that we're tracking along on the life of mine plan. And this is pleasing to see, from my perspective.

Joseph Reagor -- Roth Capital Partners -- Analyst

Okay. Fair enough. Kind of an accounting item. So far this year, the depreciation on a per-ounce-sold basis has been a bit elevated from last year. Kind of, let's call it, $320-ish an ounce or so. What do you guys see there going forward? Can we expect that to come down as you have an extension of mine life or additional resources drilled out? Or is that elevated level expected to continue?

Tom S.Q. Yip -- Executive Vice President and Chief Financial Officer

Well, Joe, well, it all depends on whether or not we increase our reserves. So if we have successful drilling results and we increase our reserves, we always treat those increases prospectively, and then we would adjust our depreciation and depletion calculations accordingly. So currently, it's just based on what we know today based on that most recent reserve report that we published back in early March.

Joseph Reagor -- Roth Capital Partners -- Analyst

Okay. Fair enough. And then Jacques, you mentioned Snowfield at some point during the call. Interesting project, especially in current market conditions, but not really what Pretivm does as far as type of ore body and type of deposit and future potential production. Is there any ability to carve that out and maybe vend it out to a different company that could look at that, that maybe is interested in all the metals, not just the gold?

Jacques Perron -- President, Chief Executive Officer and Director

Joe, now, my focus since I started was really Brucejack. I had a very, very brief conversation with the exploration team I think on my second week on the job that told me about the project, and that's about it, and I haven't spent a lot of time looking at it. So that's something in the future we're going to be thinking about. But at this point, I don't have any specific comment to make around the Snowfield.

Joseph Reagor -- Roth Capital Partners -- Analyst

Okay. Fair enough. And then on the regional exploration in general, should we expect continued updates with the earnings results? Or do you think you guys might separate that out as an individual press release when you guys get some results there?

Jacques Perron -- President, Chief Executive Officer and Director

Timing-wise, Joe, it's always difficult to say. But I'm told that up there, we drill until the month of September, and then we have to get the rigs out. It takes, I don't know, 1 month, 1.5 months to get the results, analyze them. So possibly when we do the earnings call for Q3, we may have some information to publish at that point.

Joseph Reagor -- Roth Capital Partners -- Analyst

Okay. Fair enough. I will turn it over. Thanks guys. Congrats again.

Operator

Our next question comes from Bhakti Pavani of Alliance Global Partners. Please go ahead.

Bhakti Pavani -- Alliance Global Partners -- Analyst

Thanks Jacques and team. Thank you for taking my questions. And congratulations on the quarter. Just a quick question on the development rate. Currently, you were planning 1,000 meters per month of development. And given the uncertainty around COVID, in addition to your reduced processing capacity to 3,500 tonnes per day, do you think that development rate is enough to prepare for the unprecedented shutdown due to COVID?

Jacques Perron -- President, Chief Executive Officer and Director

Yes. I think with that level of advanced -- we -- like we mentioned that on the last call -- and at the onset of COVID, we had to adjust. We were short on manpower, and we had to adjust, so we had a little dip in development, but we've recovered from there very nicely. And at the current rate at where we are, at 1,000 meter plus per month, we're in a good situation. I'd like to be able to accelerate that a little bit more. And definitely because we have more developments, we produce more waste, so we have more waste to move around the mine. So that is causing a little bit of bottleneck on how much ore we can move. So we have to balance all things. But we're working right now on plans to improve our ability to move more material, and I think we're going to be in a very good place early or very early next year, and maybe toward the end of this year, to go back to our 3,800 tonne per day average production rate going forward.

Bhakti Pavani -- Alliance Global Partners -- Analyst

Fair enough. Just kind of a follow-up. You said you would like to increase the development rate even further. What's kind of the ideal development rate in your mind would be ideal given the situation we are in?

Jacques Perron -- President, Chief Executive Officer and Director

I think for the short term, 1,100, maybe 1,150 would be where we -- would be ideal. But like I said, if we are able to maintain more than 1,000 per month, we're going to be in good shape. I'd like to see things move a little faster, but as long as we're above 1,000, we're good. And ideally, 1,000, 1,100 would be a good number for us.

Bhakti Pavani -- Alliance Global Partners -- Analyst

Perfect. My second question is with -- relates to cash. You had a record of free cash flow generation quarter. Despite that, you drew down $16 million in credit facility. Just kind of trying to understand the rationale here. And how do you plan to deploy your cash for the second half?

Jacques Perron -- President, Chief Executive Officer and Director

Yes. Well, in the second half, as I mentioned earlier, we're going to continue to be very prudent and very careful because we're a single-asset company. And if we had -- if we were to experience an outbreak of COVID-19 at site, that could shut down our operations if the outbreak was significant. So we're going to continue to be very careful. And we're going to continue to monitor the situation and look at what we're going to be doing with the cash.

As I mentioned earlier, we still want to -- we want to do a lot of drilling. There's infrastructure work that we have to do. We have projects that we want to move forward to improve operational efficiency in the mine. We're looking at electric equipment. So all these things require cash. So we're going to be managing that very carefully. We have a significant amount of debt on the balance sheet. But right now, the coupon on that debt is fairly low due to the overall LIBOR rate. So we're in a good place where we are right now, and we'll address that as we go.

Bhakti Pavani -- Alliance Global Partners -- Analyst

All right. Thank you very much. That's it from my side.

Jacques Perron -- President, Chief Executive Officer and Director

Thank you, Bhakti.

Operator

Our next question is a follow-up from Ovais Habib of Scotiabank. Please go ahead.

Ovais Habib -- Scotia Capital Inc -- Analyst

Hi, Jacques, one more question for me. This is a follow-up question from Joe. You were talking about grade guidance for the year is about 7.6 grams to 8.5 grams per tonne. You guys have done about 8.3 grams during the first 6 months. Now I mean yes, there's obviously great variability within this mine, but I mean are you expecting grade to be lower in the second half? I mean are you getting any sort of indication from the grade control drilling that you've done in Q2 how second half is kind of shaping up?

Jacques Perron -- President, Chief Executive Officer and Director

We continue to be prudent, Ovais, as you can imagine, because we don't have the full understanding of all the geology and everything. So we continue to believe with confidence that the grade will be between 7.6 and 8.5 gram per tonne. As Dave mentioned, we're happy how we're tracking here compared to the revised mine plan that was published in March or at the end of February. We're tracking well with that. We continue to have good results. You saw first quarter results were good. Second quarter results were good. We continue to see good performance. So we continue to be confident, but we want to be careful. We want to continue to be careful. We don't want to set an expectation there that we can't meet. So we continue to believe the 7.6 to 8.5 gram per tonne is the appropriate range.

Ovais Habib -- Scotia Capital Inc -- Analyst

Perfect. That's it for me. Jacques, appreciate that.

Jacques Perron -- President, Chief Executive Officer and Director

Thank you, Ovais.

Operator

Our next question is a follow-up from Anita Soni of CIBC World Markets. Please go ahead.

Anita Soni -- CIBC Capital Markets -- Analyst

Hi, thanks. So just two questions. The shutdowns that you have in the remainder of the year, can you give us an idea of like the duration and which quarter or when they'll happen? And secondly, in terms of the tax pools that you have, can you give us an idea of how much, in a dollar amount, the available tax pools that you have? And when you mentioned that it would be about three years or four years before you would be paying the full 36%, what was the gold price assumption that you used?

Jacques Perron -- President, Chief Executive Officer and Director

So I'll start with the first part of your question. So our shutdown is scheduled, right now, for the month of November, and we're planning for 7 to 10 days shutdown. It's a major modifications. We have a modification we have to make to the crusher, the underground crusher. So there's a lot of work to be done around there, and we'll take this opportunity to do other work in the mill and whatnot. But the focus area is the underground crusher. And I guess at 7 days, if it goes very well, and 10 days if it goes not so well, so that's what we're shooting for right now.

I'll let Tom answer your tax question because that's not my forte.

Tom S.Q. Yip -- Executive Vice President and Chief Financial Officer

So Anita, there are multiple tax pools that we are drawing down. I just hate to give you any specific numbers, but let's say that in aggregate, they may be in the order of over $1 billion. Generally, when we say current gold prices, the last time we looked at this, we ran it at around $1,800 per ounce with the new life of mine. So as we spend -- as you know, as we spend capital dollars, that goes into those pools and we draw them out against earnings. So that's sort of our best estimate at this point in time, three-plus years before we pay any income-type taxes.

Anita Soni -- CIBC Capital Markets -- Analyst

Okay. Thank you.

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 -- President, Chief Executive Officer and Director

Thank you, Ariel. Thank you, everyone, for dialing into our earnings call this morning. We appreciate all the comments and the questions. I will conclude this call the same way I started it, by saying that while our company delivered good results this quarter, we also suffered a devastating loss with the fatality of one of our employees. This is the most tragic reminder of the importance of safety in all aspects of our operations. You have my personal assurance that safety is and will remain my top priority. I look forward to updating you in the coming months, and I wish everyone a good balance of your day and a great weekend. Thank you.

Operator

[Operator Closing Remarks]

Duration: 53 minutes

Call participants:

Jacques Perron -- President, Chief Executive Officer and Director

Tom S.Q. Yip -- Executive Vice President and Chief Financial Officer

David Prins -- Vice President Operations, Brucejack Mine

Heiko F. Ihle -- H.C. Wainwright -- Analyst

Ovais Habib -- Scotia Capital Inc -- Analyst

Anita Soni -- CIBC Capital Markets -- Analyst

Joseph Reagor -- Roth Capital Partners -- Analyst

Bhakti Pavani -- Alliance Global Partners -- Analyst

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