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Pretium Resources Inc (NYSE:PVG)
Q4 2020 Earnings Call
Feb 26, 2021, 11:00 a.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 Fourth Quarter 2020 Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there'll 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. Jacques Perron, Pretium's President and CEO.

Jacques Perron -- President, Chief Executive Officer and Director

Thank you. Good morning, everyone. Welcome to our fourth quarter and 2020 year-end operating and financial results conference call. 2020 has been an unprecedented year with exceptional challenges. I want to thank our team for their continued hard work and dedication. However, no year is considered a success unless it is accomplished safely. And in 2020, a fatality provided a tragic reminder of the importance of keeping safety at the forefront of everything we do.

On today's call, I will briefly highlight some of our key achievements from 2020. I will then turn the call over to Patrick Godin, our Chief Operating Officer to provide some insights into our production and operating results. Following that, Matthew Quinlan, our Chief Financial Officer will review financial highlights of 2020. Finally, I will provide an overview of our near-mine exploration results and the recently announced underground exploration drilling results before closing off with a look ahead. At the end of the presentation, we will open the call to your questions.

Before we begin, note that our statements contain forward-looking information and future-oriented financial information based on certain assumptions and subject to risk factors. I refer you to the cautionary language included in our news release yesterday, as well as the 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.

Despite the challenges faced in 2020, we achieved our annual production guidance for the first time in the Company's history. Nearly 348,000 ounces of gold were produced at Brucejack and we generated a record free cash flow of $369 million. This allowed us to significantly reduce our debt by $227 million. After debt repayments, we ended the quarter with a cash balance of nearly a $175 million.

Other objectives achieved in 2020 include, accelerated underground development, ramped up production to an average processing rate of 3,800 tonnes per day, increased drilled-off stope inventory, completed 147,000 meters of in-resource definition diamond and RC drilling, as well as 28,000 meters of resource expansion drilling, and announced the discovery at the Hanging Glacier Zone just four kilometers from the Brucejack mine.

We have refocused our efforts in terms of health and safety and we are implementing changes to improve our safety culture. We will do everything we can to avoid the repeat of the tragic event that occurred at the beginning of the third quarter. The well-being and safety of our workforce remains our most important core value.

On February 10th, 2021, BC Northern Health declared a COVID-19 outbreak at the Brucejack mine. To protect the health and safety of our workforce and local communities, we implemented enhanced outbreak protocols. This included restrictions on travel to and from the Brucejack mine camp while sitewide testing was conducted and assessment by BC Northern Health could be completed.

It was determined that the majority of the positive cases were restricted to a limited cluster and on February 17th, travel restrictions were lifted. Additional protocols and procedures developed in collaboration with local indigenous partners and BC Northern Health have been established which includes testing of all employees and contractors.

Throughout the outbreak, mine and mill production continued albeit at a reduced pace for a few weeks. The company is assessing the potential impact on operations and will continue to closely monitor the situation and provide updates as appropriate. This is a reminder that COVID-19 remains a risk and could have a significant impact over a short period of time.

I will now turn the call over to Patrick to review our operational highlights for the fourth quarter and full-year of 2020.

Patrick Godin -- Vice President and Chief Operating Officer

Thanks, Jacques. Turning to operation on Slide 7. In the fourth quarter, we processed approximately 310,000 dry tonnes of ore through the mill, equivalent to 3,366 tonnes per day. And for the full-year, we processed approximately 1.3 million tonne of ore which average out to 3,572 tonnes per day. The mill operated below the permitted level of 3,800 tonnes per day due to scheduled and unscheduled maintenance and our focus on lateral development and stope availability.

By the end of the quarter, we successfully ramped up to an average processing rate, slightly above 3,800 tonnes per day in the month of December. Production costs were $217 per tonne milled in the fourth quarter and were $195 per tonne milled in the full year of 2020.

Production cost increased due to the additional lateral development in definition drilling and costs associated with COVID-19 safety protocols mainly related to employee salaries and travel costs. These protocols have increased costs by $5 per tonne milled in the quarter and $6 per tonne milled in the full year of 2020.

In the fourth quarter, we produced just over 88,000 ounces of gold. The mill feed averaged 8.9 grams per tonne and the recovery rate was 97.4%. Over the full year, we produced nearly 348,000 ounces of gold at an average grade of 8.5 grams per tonne at a recovery rate of 97%.

When you look at the quarterly gold production for the year, you'll see that we have maintained our production level within plus or minus 5% of the midpoint of our guidance range. It is broadly understood that Brucejack is a high-grade variable deposit, we'll continue to see fluctuation in production on a quarterly basis but hope to smooth that out over time. Going forward, our objective is to optimize production, reduce the quarter-to-quarter fluctuations and at the same time look, for opportunities to increase our production.

The 2020 mineral reserve reconciliation was completed by evaluating the 2020 mineral reserves against the 2020 milled actuals. In 2020, ore was mined from 69 stopes over 11 levels spanning a horizontal distance of approximately 540 meter east to west and 310 meters north to south. The 2020 milled actuals contains approximately 4% more tonne than 2020 mineral reserve primarily due to the mining -- to mining out-of-reserve material determined to be economic by the grade control program as well as greater than planned stope dilution.

Compared to 2019 Mineral Reserve reconciliation, the 2020 Mineral Reserve gold grade reconciliation improved from 72% in 2019 to 94% in 2020. This improvement can be attributed to the inclusion of the Mine Call Factor and the updated 2020 Mineral Reserve model. We expect to release an updated Mineral Resource and Mineral Reserve estimate and revised Life of Mine plan in the first half of 2022.

The current January 2020 Mineral Resource model includes portion of the January 2019 and December 2013 Mineral Resource models that have required the application of the Mine Call Factor in the Mineral Reserve. The 2022 Mineral Resources and Mineral Reserve will update the entire area of the value of the Kings Zone, with the result of an extensive -- of the extensive 2021 drill program, previous drilling and knowledge gained from more than three years of mining. In order to improve our knowledge of the ore body and establish our mine plan to reduce the production variability, we have two main priorities.

Our first priority is to increase access on the ground. Lateral development will continue to advance at a rate of over 1,000 meter per month. To increased development rate, we'll improve access to -- the increased development rate will improve access to new areas and increase our drilled-off inventory of stopes. Our target is to have about 400,000 tonnes of drilled stope ready to be blast equivalent to a full quarter of production by the end of the third quarter of 2021. This will provide more flexibility to improve blending from multiple areas and support more consistent production.

Our second priority is to increase our understanding of the ore body at Brucejack. With any variable resource, it is important to have as much data as possible to properly estimate the grade and design the mining approach. To improve the local modeling, we have significantly increased the amount of definition drilling.

As you can see on this slide, our development rate has been increasing. In Q1 of 2020, we were affected by COVID-related restriction. We had to reduce the level of activities at site, but we recovered in the second quarter. In the fourth quarter, we continued that trend of increased production.

Turning now to -- turning now to Slide 12, we have a section view of the underground development looking north. Until recently mining has been limited to only two mining horizon at Brucejack. Our mining horizon consists of four mining levels each about 30 meters in height. Earlier this year, we opened up mining on the lower horizon of the 1020 level. We now have three mining horizons to operate from.

In 2020 we began developing access into the Fault zone, which is just west of the Brucejack Fault on the 1200 and 1320 levels. We are starting to open and prepare this area for mining later this year. In the second half of this year, we will increase access for mining from -- for mining from three to five areas, which will provide significantly more flexibility in terms of production compared to previous years. Infill drilling to improve reserve definition ahead of mining was put on hold at the onset of COVID at the end of the first quarter to limit personnel at Brucejack.

By the end of the second quarter, diamond drilling activities had resumed and continued through the third and fourth quarter with five diamond drills on site. Here on Slide 13, we have a section view of the underground development looking east. You can see that we have target areas for the year, highlighted in yellow. In 2020 we completed approximately 147 meters of infill diamond and reverse circulation drilling.

I will turn the call over to Matthew for an overview of our financial performance.

Matthew Quinlan -- Vice President and Chief Financial Officer

Thanks, Patrick. We continued our track record of positive cash flows again in 2020 as we have every year since achieving commercial production in 2017. For the year, we realized gold price of $1,799 per ounce, an increase of 28% over 2019. Revenue increased by a similar 27% due to consistent production across periods. In 2020, we sold approximately 348,000 ounces of gold. Net loss of $0.21 per share for the year was impacted by the sale of Snowfield in the amount of $0.80 per share.

Adjusted earnings per share for 2020 increased by 72% to $0.95 per share and were $0.28 per share in the fourth quarter of 2020. Adjusted earnings per share exclude the effect of the loss on sale of Snowfield as well as deferred income tax expenses, both of which are non-cash items.

You may note from our financial statements that the net loss for the year was due to a large deferred tax expense in excess of our earnings before taxes. The sale of Snowfield gave rise to a non-cash deferred tax expense even though a loss on sale was recognized as Snowfield did not have any tax basis. Therefore, no reduction in the loss could be accrued.

In addition, the proceeds received from the sale reduced our tax pools, giving rise to a further deferred tax expense. I would like to stress that no cash taxes will be payable on the proceeds from the sale of Snowfield and as we have stated before, we are not in a cash taxable position due to capital expenditure pools and tax loss pools arising from the development of Brucejack.

We don't anticipate paying cash taxes for federal and provincial income taxes for three to four years at current gold prices. And once we are in a tax payable position, we anticipate paying taxes at a combined rate of 36.5% of mine operating earnings.

Turning to Slide 16, the year-over-year increase in revenues of $133 million to $617 million helped drive cash flow from operations to $317 million for the year, an increase of 41%. Operating cash flows reflect COVID-19 costs as well as higher year-over-year production costs, a component of all-in sustaining cash costs.

Total capital expenditures of $49 million in 2020 include approximately $27 million of sustaining capital expenditures, $12 million of expansion capital and $10 million of additions to exploration and evaluation assets in the year. Free cash flow reached a record of $369.2 million for the year, double the level of 2019.

In terms of quarterly results, operating cash flow and free cash flow in the fourth quarter of 2020 were $89 million and $170 million respectively. The fourth quarter 2020 free cash flow of course includes the $100 million received from the sale of Snowfield.

Consistent with our stated objectives, we used our strong cash flows to significantly reduce debt and made debt net debt repayments of $210 million in the year. We ended the year with approximately $270 million of debt, comprising of bank debt of approximately $171 million and convertible notes of $100 million. Cash on hand and available liquidity were approximately $175 million and $335 million respectively at year-end.

Turning to Slide 17, AISC in 2020 of $981 per ounce was within our guidance range for the year. AISC increased from $888 in 2019 primarily due to increased levels of lateral development and drilling included in production costs as well as $24 per ounce of COVID-19 related costs and $20 per ounce related to the departure of former officers. In summary, we successfully achieved our 2020 operating and financial guidance and generated record free cash flow.

Before I pass the call back to Jacques, I would like to note one accounting policy change we noted in our financial statements and MD&A that will take effect on January 1st, 2021. Moving forward, we will expense certain exploration and evaluation expenses rather than capitalize them on the balance sheet. This will only apply to expenditures for regional exploration, such as Hanging Glacier and will not affect the accounting treatment of exploration and drilling within the Brucejack mine. As I just mentioned, in 2020, we incurred approximately $10 million of such expenses.

This change in policy reflects the maturation of our business into an established mid-tier gold producer. Important to note that the accounting policy change will not affect the calculation of free cash flow, ASIC or total cash costs. However as accounting policy changes such as these are applied retroactively to the inception of the company back in 2010, there will be a number of changes to our historical financial statements, when we release them in the first quarter of this year.

With that, back to you, Jacques.

Jacques Perron -- President, Chief Executive Officer and Director

Hey, thank you. Matt. Stepping further out from the Brucejack mine, we hold over 1,200 square kilometers of mineral claims in the Golden Triangle in BC. The 2020 regional exploration program on the company's Bowser Claims included drilling at the Hanging Glacier Zone and other zones.

The highlights from the program was the discovery of epithermal-style gold mineralization in the Hanging Glacier Zone, located just four kilometers northwest from the Brucejack mine. The new zone of gold mineralization demonstrates the district-scale potential at Brucejack. We continue to believe the best value for our shareholders is to invest a portion of our cash flow in exploration of our existing claims and in particular, near the Brucejack deposit.

In 2021, we expect gold production at the Brucejack mine to be in the range of 325,000 to 365,000 ounces. We forecast the processing rate to average 3,800 tonnes per day with an annual gold grade ranging from 7.5 gram to 8.5 gram per tonne at the targeted gold recovery of 97%. We expect all-in sustaining costs for 2021 to range from $1,060 to $1,190 per ounce of gold sold. AISC estimates in 2021 reflect the investments in an accelerated rate of underground development, comprehensive drill programs and improvement-oriented capital expenditures.

We forecast sustaining capital expenditures, a component of AISC to be between $50 million to $55 million. This includes the capitalized portion of underground development and drill programs as well as improvement-oriented expenses such as starting to replace the haul truck fleet, to reduce cost of installation and maintenance and increase productivity. We expect free cash flow for 2021 in the range of $120 million to $170 million at a gold price of $1,700 per ounce.

The 2021 free cash flow forecast includes expansion-oriented capital expenditures, which totaled approximately $55 million to $65 million. This includes construction of permanent camps and projects to support growth and to improve efficiency of operations. The free cash flow forecasts also include expenditures related to the 2021 near-mine exploration program.

The 2021 Brucejack definition and expansion drill program is anticipated to total approximately 195,000 meters of drilling comprised of definition and sustaining and resource expansion drilling. Underground resource expansion and exploration drilling will target near-mine zones with the potential to extend mineralization underground. Initially, six drills are planned to be deployed underground with an additional two surface drills to be added during the summer.

In 2020, we completed about 28,000 meters of resource expansion drilling outside the resource shell to the north of the value of the King Zone. This is the first time resource expansion drilling has been conducted at Brucejack since production started. Yesterday, we announced the results from the first phase of 2020 resource expansion drill program, which included high-grade gold intercept as far as 300 meters from the current resource shell and as high as 2,590 grams per tonne over one meter.

The North block zone is an exciting potential extension of the Valley of the Kings deposit at Brucejack. We have already committed to significantly increase our resource expansion and exploration efforts in 2021 and the results from this first phase support our decision to make that investment.

Looking ahead to 2021, we will continue to emphasize safety with a focus on what we can do to improve the safety culture. We will also maintain our strict COVID safety protocols to minimize the potential for another outbreak at site. Based on our production and gold price estimates, we expect to generate a significant amount of cash this year.

We look forward to continuing to announce drill results. The remainder of the 2020 resource expansion drill results are expected in the second quarter. We will continue to provide results from the 2021 resource expansion drilling throughout the year as they become available. Looking further ahead, we will continue to advance our exploration efforts near-mine where we intend to build on our resources.

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

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, thanks for taking my questions. It's nice to see everything you've accomplished throughout 2020 especially noting here your balance sheet. I'd also highlight that the guidance uses gold prices of $17 an ounce so that's actually 2% below what we're at right now. Can you walk us a little bit through the travel restrictions at Brucejack or like the issues that you've had and how your labor force is currently reacting? Are there any lapsing issues? Has there been any longer-term changes? What are you seeing, what are you hearing on the ground, please?

Jacques Perron -- President, Chief Executive Officer and Director

Good morning, Heiko Thank you for your question. I'll give you a better color and Pat will -- can add to what I'll provide. But we were fortunate in 2020 to be able to operate the mine without any COVID cases at site and -- positive COVID cases at site.

Unfortunately, we were worried that after the holiday period that we might get some impact from people traveling and coming back to site and bringing the virus to site and that happened to us. So we started to manage cases, monitor the situation and the number of cases increased quite rapidly because it was contained to a cluster of employees that were working together and not necessarily following all the proper rules and protocol.

And as you know it's -- we've been repeating worldwide for a year now that it's important to wash your hands and wear your mask and be diligent and we found out that through all the tracing we've done that a small number of our employees were not or contractors were not following the rules. And on that note, I want to say that the majority of our employees, the vast majority of our employees are following the rules and are doing a great job.

But it only takes a few to start to spread the virus and we started to isolate people to a point where BC Northern Health decided that we had to control the situation by locking down the site, so preventing people from traveling in and out and testing everybody to understand the extent of the various people that are -- that were infected.

I think, it took about two days to test everybody and we got the results fairly quickly. Definitely during that period the employees were concerned and were worried, but I can tell you when we lifted the travel restriction on the 17th, morale shot up by thousands of percent because as you can imagine being stuck at site and not knowing when you're going to be able to leave and being afraid that the virus is around you and that's a -- it was a very uncomfortable situation for a lot of people, but it's much better right now.

And with that, we have worked closely with our indigenous partner to implement new protocols and new rules, and I'll let Patrick explain what -- how we're managing the situation now and what's the process to mitigate the risk of having another outbreak.

Patrick Godin -- Vice President and Chief Operating Officer

Yeah. So, in addition, to respect the rule because it's where basically the main issue, is when we're not respecting the rules. We are now testing all the employees when they are coming in five days after their arrival and before to let them leave the site. So basically it help us to have a better control of what we are doing.

We are also looking to actually improve the testing protocols with rapid testing. We are in discussion with the authorities about that and also we had some additional protocols, because as you know at Brucejack we have three camps, one camp at the entry, one camp at the beginning of the glacier, and one, the main camp at the operation.

So we have additional protocols to control the access with the suppliers and contractors. And also in addition to that, we create what we call bubbles, is mainly now for our native partners who are living in Northern Territories before to when they are tested outside, immediately after that they are leaving the site together in a specific vehicle and they are going back to their community. So we're just making sure that they are not exposed on the way to a potential -- to a person who is potentially infected. So we improved a lot in this manner. I think the employees are pretty satisfied by this and we will apply all these protocols up to the moment that probably the authorities will advise that we don't have to.

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

Okay. It's a very comprehensive and good answer. I appreciate that, thank you. The other one I think I'm just trying to clarify something with your corporate administrative costs, two quick things there, they went up 13.6% or $2.5 million to $21.2 million, looks like this is pretty much an increase in salaries and benefits due to a variety of termination expenses, but it was also offset by some share-based comp. Nonetheless, you're still looking at $18 million to $22 million for 2021, so the midpoint of that is $20 million. First of all, is the cash versus non-cash, is that an offsetting thing or is that an accounting thing, or what am I missing?

Matthew Quinlan -- Vice President and Chief Financial Officer

I don't think you're missing anything. You are bang on. It's Matthew Quinlan here. In 2020, you're right, there were certain termination expenses and then pursuant to those employment contracts countervailing that was -- when those officers left, there was a certain forfeiture of their RSUs and deferred comp. So there was a much lower non-cash component.

Going forward, we obviously have guided net for this year in 2021 of $18 million to $22 million of G&A, there'll be higher component of RSUs and deferred comps, because that is a, there is no forfeitures, but commensurately there's a lower cash expense. Does that help answer your question?

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

Yes, yes, it does. And it actually answers my next question as well. And then I just have, just to follow-up on that. Why do you still expect $20 million? Because presumably, that termination stuff was a one-time thing.

Matthew Quinlan -- Vice President and Chief Financial Officer

You're right, but the forfeitures were actually quite, quite large. And on Page 27 of our MD&A, there is some further details as to the quantum. So the, just looking for that page right now, the several million dollars was the effect of the -- on the RSU expense.

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

Got it. Okay, perfect. Thank you very much. I'll get back in queue. I appreciate your answers.

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

Hi, good morning everyone. My first question is with regard to the reserve reconciliation that you guys provided versus what was milled in 2020. Can you give us a breakout of what was -- what was attributable to mining outside of the reserve envelope and what was attributable to stope dilution -- excess stope dilution? And then secondly on that would be the amount of excess stope dilution. So what are you seeing in terms of dilution and what are your targets?

Jacques Perron -- President, Chief Executive Officer and Director

Okay, in terms of dilution, in the reserve, we plan 90% -- 94% of mining recovery and 12% of dilution. For 2020, in terms of mining recovery, we are at 88.3% and in term of dilution we are at 18.2%. So basically it's -- the increase in dilution is explaining a part of it.

Anita Soni -- CIBC Capital Markets -- Analyst

Okay. Yeah. And then -- so, yeah that's explaining, I mean -- so, would you say it's more stope dilution than mining outside of the reserve envelope hat what's caused the 6% off on the grade?

Jacques Perron -- President, Chief Executive Officer and Director

I will say 50-50.

Anita Soni -- CIBC Capital Markets -- Analyst

50-50? Okay. And then in terms of go forward, do you expect that similar types of like dilution, I mean going forward in 2021, is that what you guys are factoring in when you took down. I mean the prior life of mine plan had 8.6 for this year. And then when you guys put out guidance and thank you for this call because it's the first opportunity where you have talked about the guidance here. The grade went down from 8.6 to 7.5 to 8.5. So I'm just trying to get an understanding of the implications of that beyond 2021.

Patrick Godin -- Vice President and Chief Operating Officer

So I can say to you that for the dilution we are still forecasting upwards [Phonetic] of 12% because I don't want to lower the bar in terms of quality. So it's -- and we are working really hard actually to improve our dilution, the trend is in that way. But we are still planning 12% of dilution going forward.

Anita Soni -- CIBC Capital Markets -- Analyst

Okay. So then, why was there a change in the reserve grade from what the Life of Mine plan had sort of given us as what we should be looking for in 2021?

Matthew Quinlan -- Vice President and Chief Financial Officer

It's mainly sequencing, Anita and when we, I have repeated this a few times. There is a difference between guidance and the reserve. The reserve is one thing, but the guidance we always, we have a variable to ore body, so we guide 7.5 to 8.5 last year, it was 7.5 to 8.6, why not 8.6, so we could have used 8.6 this year, but we said 7.5 to 8.5 because we know we're going to have variability and I've learned in this business over the years that it's better to under-promise and over-deliver. So, I wouldn't link the guidance to the reserve. Those are two different things in my mind.

Anita Soni -- CIBC Capital Markets -- Analyst

Okay. We do have to have something though to just try to put it in our models and usually the 43-101 is what you look to, but I'll leave that point. And second question and final one, then I'll leave it for some of the other people to ask questions. In terms of the costs, that Q4 the costs were up quarter-over-quarter. And is that the kind of unit cost range you're looking for in 2021. And again, are those the types of things cost, unit cost and like the 210, 215 level that you are forecast -- that you expect to see out in 2022 and beyond or is there some kind of improvement that you're seeing versus 2021?

Patrick Godin -- Vice President and Chief Operating Officer

Okay. So for Q4, we have the main aspect is -- the main one is that we process less tonnes. So it's impact -- it impacts the unit cost per tonne for sure. No matter if the grade was higher than expected and also we have the seasonal effect on a quarterly basis from the quarter to [Indecipherable] in winter our operating costs are higher than summer. In the year we averaged $181 to $195. So basically we are more or less trending this year between $215 and $195.

Matthew Quinlan -- Vice President and Chief Financial Officer

I think if you do -- if you do the math, Anita, and you look at the costs we had in the fourth quarter, you will remember that we had a 10 day maintenance shutdown to replace the feeder on the crusher underground. So if we had operated the full quarter at 3,800 tonnes per day, if you take that, you would have had very, slightly increased variable costs for reagents and ball mill -- balls and whatnot in the mill.

But at the end of the day, the costs would have been closer to $195 to $200. So if you look at the average -- the average between the quarter and the year, that's probably where we're going to set for 2021 at this point. Now that being said, it's going to definitely depend on COVID. Like in the first quarter, we were impacted for a few weeks, we had to reduce throughput because we had people in isolation and we were running out of operators or people to feed the mill. So we had to reduce the throughput and that's going to have an impact on our unit costs, if we don't process the 3,800 tonnes per day.

With the mill that we have, we have the ability to catch up. So, Q1, we might be a little lower in Q1 and we'll be better in the other quarters and also in Q1, we have seasonality. Like -- I think last time I checked, we were up now to about 14 meters of snowfall at site. Last year we got 17 meters. So we have about 90 temporary employees shovelling snow in the winter. So that's an additional cost that we don't have in the summer months, so seasonality has an impact and also tonnage.

But like I said, we had a slight impact in the last couple of weeks because of COVID, if we get back and we're not impacted by COVID, anywhere between, if you take the average between $195 and $217, I think you're going to be in the ballpark.

Anita Soni -- CIBC Capital Markets -- Analyst

Okay. Well, luckily backend loading with this gold price environment in Q1 will be such a bad thing. So, anyway, I'll leave it at that.

Jacques Perron -- President, Chief Executive Officer and Director

Okay, thank you.

Operator

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

Joseph Reagor -- Roth Capital Partners -- Analyst

Hi guys, thanks for taking my questions.

Jacques Perron -- President, Chief Executive Officer and Director

Good morning.

Joseph Reagor -- Roth Capital Partners -- Analyst

Good morning. So, kind of following on a little bit of what Anita was asking, maybe asked in a different way, looking at this year's guidance the 7.5 to 8.5 grams per tonne, is that -- is another way of looking at that, that you would expect something between an 85% and 100% reconciliation, looking back at that -- you said 94 for last year. Is that kind of what the guidance is based on or is it 80 to 95, like how would we think about that in a reconciliation kind of way.

Patrick Godin -- Vice President and Chief Operating Officer

As I've said, the 7.5 to 8.5 guidance is not based -- it's based more on sequencing, it's based more on the fact that the stope is ready to be mined because the other one is what backfilling up. So it's more a question of sequencing. I think if you look up to me, the reconciliation of 94% is for this year is excellent. It's in the range of the reserve. You know if you -- if you can be in the range of 5% of accuracy for reserve, it's excellent and we have an ore body that is having a lagging effect, so the variability is very significant.

So in this regard, we're not expecting. Actually, I think we are in the -- if I consider the sweet spot in terms of reconciliation in term of tonne, in term of grade and I think the trend is to maintain more or less and we expect that next year, we're going to be better. But I think we are where we are, it's not based -- the guidance or not based at all on the reconciliation factor.

Joseph Reagor -- Roth Capital Partners -- Analyst

Okay. Okay, so that you're not like discounting a flat percentage either. It's just one -- that's what's in the mine plan depending on which stopes you open.

Patrick Godin -- Vice President and Chief Operating Officer

Yeah.

Joseph Reagor -- Roth Capital Partners -- Analyst

Okay.

Patrick Godin -- Vice President and Chief Operating Officer

Okay as we said to you that we mined 69 stopes this year and in the -- it's a lot of stope for the lower tonnage of 3,800 tonnes per day. So it can happen in the next year. We will, at year-end or beginning of the year, we will shift some stopes from one quarter to another one and it will affect. So it's more a sequencing than -- factor than something else.

Joseph Reagor -- Roth Capital Partners -- Analyst

Okay. And then on the debt front, any goals for this year for further debt reduction specifically or any thoughts about refinancing, what's left while rates are low.

Jacques Perron -- President, Chief Executive Officer and Director

Hi, Matt can give you some more color, but as we mentioned last year, one of our priority is to -- our priorities is to reduce the debt, but we want to work in the first half of this year to come up with a good plan, which is not finalized right now, but we want to build our plan and Matt can give you a little bit of color on that.

Matthew Quinlan -- Vice President and Chief Financial Officer

Thanks, Joe. Yeah. We have a very strong bank group, a very supportive bank group. We have a largely undrawn revolver as you'll see in our financial statements that matures in 2022. So we are going to be looking to refinance the revolver and we also have the convert due in March that we need to address as part of that strategy, but we are certainly not being complacent about refinancing, we have an action plan and we'll update the market when that's done.

Joseph Reagor -- Roth Capital Partners -- Analyst

All right, thanks. I'll turn it over.

Jacques Perron -- President, Chief Executive Officer and Director

Thank you.

Operator

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

Ovais Habib -- Scotia Capital Inc. -- Analyst

Hi. Jacques and the Pretium team. And thanks for taking my questions.

Jacques Perron -- President, Chief Executive Officer and Director

Good morning, Ovais.

Ovais Habib -- Scotia Capital Inc. -- Analyst

Good morning. Just a couple of questions have been answered, so just a follow-up question on maybe on Heiko's question on COVID impacts. It was great to hear that you guys have reiterated your '21 guidance despite the COVID challenges that you guys faced in February. Now, are you noticing any impacts to your drill campaign or underground workmen kind of going into the next couple of quarters based on what you saw in February?

Patrick Godin -- Vice President and Chief Operating Officer

Not really, because when we pre-authorized, as Jacques explained, in reality we were short of manpower because few were in isolation and some others weren't available to reach the site. We pre-authorized in our strategy the production drilling and the development, mainly because if you are in an underground mine and you're losing opportunities in development and production drilling, you cannot catch-up.

So basically, actually, we maintain the accelerator and the pace in the -- for the development in the production drilling and we slowed down the mill. As Jacques explained, this mill is really efficient. We can process slightly more than 4,000 tonnes per day easily. So we will be able, we will be in the possibility to catch-up going forward.

So basically we position ourselves, we mitigate our risks to keep the development and keep the production -- and the production drilling in the forefront and we did not slow down more than expected, the exploration drilling too because it's critical and crucial for us, but we know that we can process more going forward, and we can catch up on a timely manner.

Ovais Habib -- Scotia Capital Inc. -- Analyst

Okay, that's good to hear. And just my second question is on, I believe you completed about 72,000 meters of infill drilling in 2020. Can you provide some color on if this campaign was kind of in line with your expectations and has that campaign kind of provided any improved visibility?

Jacques Perron -- President, Chief Executive Officer and Director

Yeah, well, we got -- we did a diamond [Phonetic] drilling in the second half of the year and so far the results match our expectations. What I can tell you is one of the challenges that we have right now is when we drill and we take a sample. Because our lab at site is basically too small to handle all the samples we generate, we have to send samples outside, to outside lab and right now it takes anywhere between 10 and 13 weeks for us to get the assays back, which is a big challenge when you have to make decisions on where you're going to develop and where you're going to mine.

And so that's one of the reason this year, we are investing money in building a new lab and a proper lab that will be able to handle all our samples and give us the results within one to two weeks instead of 10 to 13 week. So, we did quite a bit of drilling in 2020, but we only got results for maybe, let's say, like a half of what we drilled. We're still waiting for the other half.

So the labs in Canada right now, like in Vancouver there's labs that are processing samples from Quebec and Ontario and some of our samples go down as far as Peru to get analyzed. So it's a real challenge. Good to see the gold price that high, but everybody is drilling right now. So it puts a lot of pressures on lab. So we expect to have our new labs operational in the third quarter, at the beginning of the third quarter.

So when we get there, we'll have a much better turnaround and be able to digest the information faster and that's one of the reasons that we decided not to update our resource and reserve this year because we drilled a lot last year, but we didn't really have the results from the drilling. So we'll be in a much better place at the end of this year and that's why we're planning to update our Mineral Resource and Mineral Reserves in 2022.

Ovais Habib -- Scotia Capital Inc. -- Analyst

Got it. Okay. Thank for that, Jacques, and that's it for me.

Jacques Perron -- President, Chief Executive Officer and Director

Thank you, Ovais. Have a good day.

Ovais Habib -- Scotia Capital Inc. -- Analyst

You too.

Operator

Our next question comes from Don DeMarco of National Bank Financial. Please go ahead.

Don DeMarco -- National Bank of Canada -- Analyst

Thanks so much for taking my call, Hi Jacques and team. Some great Phase 1 expansion drilling results released yesterday morning. You mentioned those from the north block impressive grades with the 2,500 grams per tonne. How accessible are these high-grade zones. We know that they are within 300 meters of the pit shell.

Jacques Perron -- President, Chief Executive Officer and Director

Yeah. Don. If you -- if you look at the sections and the little drawings that are available with the release that we issued yesterday, like it's right there. It's right next to the development. What we are -- the North Block is drilling outside of the resource shell but basically, what we're drilling there are extensions of the domains of the VOK and we're starting to see new domains appearing and it's the same style of mineralization. So the results that we're getting so far are very much in line in what we get at the VOK, OK so it's -- it's early days, it's only a few holes. We're going to get the results of the second phase in Q2 and then no, no, no, we're going to do a third phase of drilling, which has already started, but it's exciting.

And you know when you see numbers like that and you see that you're very close to your existing infrastructure, it's an area we could access fairly easily, but first thing we have to do, before we rush into the zone with our five-meter by five-meter diamond drill hole, we're going to -- we're going to drill and we're going to try not to repeat the mistakes of the past and we're going to drill, understand what we have and then we're going to go in there and position ourselves properly and get going with mining. But I'm pretty confident this is going to turn out into a very good zone for us.

Don DeMarco -- National Bank of Canada -- Analyst

Okay, that's great and maybe just continuing on that then. Certainly, the grades are high, what about the width. What are your thoughts on the intercept widths, are those also consistent with some of what you found within the reserve area of the Valley of the Kings?

Jacques Perron -- President, Chief Executive Officer and Director

Yeah, well, it's fairly typical. You have, what we emphasize as the high grade, but around these high grade zone, there is a -- there is a large halo of lower grade material between -- I don't know between 2 gram and 5 gram per tonne. So when you blend everything, you can develop significant size stopes but the first thing we have to do is do all the drilling, understand what we have, do the interpretation and then we can start to build the corridor that we want to mine within those domains.

Don DeMarco -- National Bank of Canada -- Analyst

Okay, great. And when I look at the scope of your 2021 program, I don't see North block listed. Like in light of these results that you released yesterday, will you modify your '21 program to go back and do a little bit more drilling there?

Jacques Perron -- President, Chief Executive Officer and Director

No, we have -- if there is a launch -- there is a section that we, we show in the presentation and you can see that, we're going to have, that's all the areas that will be active in 2021 for the 195,000 meters of drilling we're going to do and North Block as part of that and so we drill Phase 1 and Phase 2 in 2020 and we have started the Phase 3 now in North Block, which is higher fans and longer holes, so that's going to be done this year, as part of the full -- the program with all the other zones that we are going to be drilling in 2021.

Don DeMarco -- National Bank of Canada -- Analyst

Okay, great. Maybe just shifting gears then to -- obviously your strategy this year is to increase the drilled-off inventory. How do we know if you're making progress on your objective here, I mean is it something that's just looking at maybe reduced production and grade volatility quarter-over-quarter? Is it going to take several quarters to really know if you're progressing [Speech Overlap] what should we look for?

Jacques Perron -- President, Chief Executive Officer and Director

Yeah, there is two aspects to this. I think the first -- the first one is to look at our drill inventory. At the end of Q3, I think we were 150,000 or 153,000 tonnes of inventory, Pat?

Patrick Godin -- Vice President and Chief Operating Officer

At the end of the year, we were at 256,000.

Jacques Perron -- President, Chief Executive Officer and Director

So, we went from 150,000 to 256,000 at the end of the year. And we're going to continue to grow that inventory. And our objective, as Pat said, is to get to 400,000 tonnes by the end of Q3. As we build that inventory, I think what's going to be different for you -- and for you guys in particular, is we're going to be able to and we're not quite there yet, but we're going to be able, when we do these earnings calls to give you a very -- a good understanding of what's coming for the following quarter and that's when you are going to see that we can shoot, we can predict, we can forecast what's coming for the following quarter a lot more accurately.

Don DeMarco -- National Bank of Canada -- Analyst

Okay. Okay, great. And just maybe my final question perhaps related to this. So as you drill off this inventory and you've got this mill that can run above nameplate, what about making a more substantial increase to the mill throughput. What are the bottlenecks there? I think it was related something to the tailings, but if you could remind me what that is?

Jacques Perron -- President, Chief Executive Officer and Director

Well, there's two major items that we need to think about. Number one is our permit. We're capped at 1,387,000 tonnes per year. So if you divide by 365, it's 3,800 tonnes per day, but the cap is not a daily cap, it's a yearly cap. In order to increase throughput, we would have to go for permit amendments. And in order to do that, we want to make sure that the Lake [Phonetic] will be able to handle additional volume.

So we're doing -- we're going to do technical studies this year. And on the flip side of that, it's to make sure the mine can supply. We have one ramp, we have limited number of vehicles we can put in the ramp. So we need to think about all the logistics and the productivities and whatnot to see how far we can push the mine to be able to increase throughput.

So, those are the two major criterias; permitting and the mine capability of supplying additional tonnes. As Patrick mentioned, the mill -- the mill is not an issue for us at this time.

Don DeMarco -- National Bank of Canada -- Analyst

Okay. Okay, thanks so much for that. That's all from me.

Jacques Perron -- President, Chief Executive Officer and Director

Okay. Thank you, Don.

Operator

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

John Tumazos -- John Tumazos Very Independent Research -- Analyst

Hello. Good morning, Jacques.

Jacques Perron -- President, Chief Executive Officer and Director

Good morning, John. I have a hard time to hear you, John.

John Tumazos -- John Tumazos Very Independent Research -- Analyst

Just shut off the other call, please. I'm sorry. Jacques, I'm doing my best. Jacques, would you buy back stock? You're doing great and your stock is 10 times earnings. It's like Centerra in Kyrgyzstan almost.

Jacques Perron -- President, Chief Executive Officer and Director

You know what John, that's a good -- that's always a good question. Our priority right now with our cash is to focus on our debts and focus on all the nice things we want to do to improve the value of the project and the drilling and whatnot and we're not just there yet at the point where we can start to make decisions on buyback stock or dividend.

This is a, while, first, it's not my -- it's a Board decision, it's for the Board to make that call. But I would say it's definitely not something for this year. It's going to be something, maybe we're going to start to think in 2022.

John Tumazos -- John Tumazos Very Independent Research -- Analyst

Can I ask you another question, Jacques, and I might be overreacting to the phrase in the press release, improve the understanding of the ore body. But you've mined about 1 million ounces of gold and 4 million or 5 million ounces of ore and some development very close to the ore. So you have a pretty good bulk sample by now to understand the ore body. Is it really the case that the ore body is variable? It is the way. God made it. Maybe God in heaven don't understand the ore body well.

Should you state your reserves as a range of grade rather than a single point? I think the NI 43-101 rules are sort of a fantasy, the deterministic single point numbers are often not realistic and give your annual guidance a grade range and give your cash flow guidance as a grade range and just to admit that it's hard ore body to estimate?

Jacques Perron -- President, Chief Executive Officer and Director

Well, it is -- of everything you said John, between God and the regulation, it is a hard body -- difficult ore body to estimate. And yes, we've mined quite a bit in that ore body. We have a few years of mining so far and we're still learning about it. But I -- we truly believe here that with the work we're going to be doing this year and all the drilling we're going to do and there's all kinds of other technical work that we're doing.

We're not just doing drilling looking at all the data and everything we've learned over the years. We feel strongly that when we do our 2022 update, we're going to have a much better understanding of the -- we're going to be able to put together a much, much better resource reserve update than what was done in the past.

John Tumazos -- John Tumazos Very Independent Research -- Analyst

I have great confidence that you'll do as much as God could do [Foreign Speech]. Bye-bye.

Jacques Perron -- President, Chief Executive Officer and Director

Thanks, John.

Operator

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

Jacques Perron -- President, Chief Executive Officer and Director

Hello, Anita.

Anita Soni -- CIBC Capital Markets -- Analyst

Sorry I was on mute there. Just to follow-up in terms of the dilution targets that you have. Can I get some color on, I know you're still targeting 12%, but can you talk about how you're going to get it from the current levels back up to the 12% or what was -- like what will change over the course of this year?

Patrick Godin -- Vice President and Chief Operating Officer

We have a lot of things that we are working on actually. We're working on the quality of the pace, so how we can improve the pace. You have also the fact that you can mine over your pace instead to mine under your base. We have the drilling that we are working on actually. We have the undercuts. We also -- what we will implement this year is we will monitor the precision of our blasting holes, though that's something that we will reinitiate in the last days.

So basically, it's all, and also we are using high technology techniques for blasting. We're using electronic detonators. No matter of that, we will review the timing. So we are working. It's where we stand actually and it's also in direct relationship, the dilution, it will depend. A majority of our stopes are I think a hanging wall but they are 80 degrees. We have some who are maybe more at 70. So we are -- we will investigate more on the cable bolting of the hanging wall to reduce the dilution.

We have an economic rationale to do this, it's what we will assess. And basically it's what it is. In terms of recovery, that is another aspect too. We are working-on on this. We recently purchased Blockholer with a remote jumbo to drill and blast the big pieces of farc that are remaining in the stopes that we cannot extract because we remotely -- we have a remote scoop trans to finalize the clean-up of the stopes.

So the fact that we have this new equipment improve also the recovery in our site. So basically it's not a one-action, it's not a problem, it's programmatic and it's coming with a lot of combined solutions and we are actively working on that actually. The focus for us, it's a priority to improve the recovery for us and reduce dilution is essential, because we have -- as Jacques explained, we have high-grade ore body. So we are, we want to prune the quality before quantity and it's what is important in our case.

Anita Soni -- CIBC Capital Markets -- Analyst

Yeah, thank you very much.

Operator

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

Jacques Perron -- President, Chief Executive Officer and Director

Thank you, everyone, for dialing into our earnings call this morning. We appreciate all the comments and questions and the more interesting ones. We look forward to updating you in the coming months. And I'd like to remind everyone that we're living under unprecedented times and it's important for everyone to follow the guidelines and the restrictions and to avoid any major health issues.

So, once again, we would like you to -- we would like to thank our team for their dedication and hard work as we continue to operate Brucejack. Without everyone's effort nothing would be possible. So stay safe and have a great weekend.

Operator

[Operator Closing Remarks]

Duration: 62 minutes

Call participants:

Jacques Perron -- President, Chief Executive Officer and Director

Patrick Godin -- Vice President and Chief Operating Officer

Matthew Quinlan -- Vice President and Chief Financial Officer

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

Anita Soni -- CIBC Capital Markets -- Analyst

Joseph Reagor -- Roth Capital Partners -- Analyst

Ovais Habib -- Scotia Capital Inc. -- Analyst

Don DeMarco -- National Bank of Canada -- Analyst

John Tumazos -- John Tumazos Very Independent Research -- Analyst

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