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Pretium Resources, Inc. (NYSE:PVG)
Q1 2021 Earnings Call
May 5, 2021, 12:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Thank you for joining us this morning. Welcome to the Pretium Resources First Quarter 2021 Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation there will be an opportunity to ask questions. The conference call today is being webcast live and available along with the presentation slides on Pretium's website at pretivm.com.

I 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 first quarter 2021 operating and financial results conference call. The first quarter of 2021 has proven to be very challenging, but thanks to the dedication of our team, the support of our contractors the contributions of our First Nation community partners, our healthcare provider Iridia Medical and BC Northern Health operations continued throughout this COVID outbreak and we delivered a solid performance under the circumstances. On today's call, I will briefly touch on some of the key events of the first quarter.

I will then turn the call over to Patrick Godin, our Chief Operating Officer, to provide an overview of our production results and the progress of operations. Following that, Matthew Quinlan, our Chief Financial Officer will go over some of the financial highlights of the quarter. Following the quarterly review, I will provide a summary of the recently announced underground expansion drilling results before closing off with a look ahead to the remainder of the year. 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 of 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 US dollars, unless otherwise noted.

The health and safety of our workforce remains our number one priority. Last year, we launched an extensive companywide health and safety plan to transform our safety culture. Here on the 4th slide you can see our rolling 12 month lost time injury frequency rate and our total recordable injury rate which is starting to trend in the right direction. There is still room for improvement and it will be an ongoing process, as we continue to focus our efforts to emphasize the importance of safety and ensure it is at the forefront of everything we do. Despite the obstacles faced in the first quarter, we were able to maintain operations and produce almost 86,000 ounces of gold. It was yet another profitable quarter and we generated nearly $51 million in free cash flow. We ended the quarter with a cash balance of nearly $209 million and subsequent to the end of the quarter, we repaid the remaining $38 million on the revolving portion of the loan facility. We had several major initiatives under way, such as accelerating underground development, infill drilling and increasing drilled up stope inventory with the intent to improve operations at Brucejack.

We're also making significant investments and future growth which includes construction of upgraded Camp facilities, an assay lab and integrated core shack along with resource expansion and near-mine exploration drill programs. As most of you are aware, a COVID outbreak was declared at Brucejack during the first quarter. We have been lucky enough to make it through 2020 with zero cases of COVID at Brucejack, but with the rising number of cases in BC, and Canada it unfortunately finally got to site.

On February 10, 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 quickly implemented our management plan, which included enhanced protocols such as restricting travel while sitewide testing could be completed. In collaboration with our local indigenous partners and BC Northern Health, additional procedures were established including ongoing testing of all employees and contractors.

As a result of this cooperation and the quick response of our team, the COVID outbreak was declared over on March 21, with no new cases reported. Following the outbreak a vaccination program was launched at Brucejack under the guidance of BC Northern Health. Although mine and mill production continued throughout the quarter, the outbreak -- during the outbreak it was at a reduced rate. We 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 provide an overview of our operations for the first quarter of 2021.

Patrick Godin -- Vice President and Chief Operating Officer

Thanks. Jacques turning to operations on Slide 8, the first quarter, we processed approximately 341,000 tons of ore through the mill equivalent to 3,790 tons per day. This is slightly below our objective of 3800 tons per day as a result of the COVID outbreak. The production [Phonetic] cost for the first quarter's averaged 188 per ton milled an increase from the first quarter last year. The cost increased due to the strengthening Canadian dollar and the extra costs associated with the COVID safety protocols.

The change in the exchange rate increased production cost by about $16 per ton and the COVID safety protocols resulted in an additional $8 per ton milled. Partially offsetting this was approximately $4 per ton of lower costs due to the lower levels of production drilling as well as lower blasting and ground support cost. Turning to Slide 9 as you can see our quarterly rate of underground development has historically been trending up quarter-over-quarter. In the first quarter of last year, the onset of the COVID pandemic stalled our momentum, and then in the first quarter of this year our rate of development was impacted by the COVID outbreak.

Although we achieve the targeted rate of 1000 meter per month, this was lower than our anticipated performance. We will be increasing our efforts to push on development to get back on track with our 2021 plan. Despite the challenges we faced this quarter, we still produced nearly 86,000 ounces of gold, which is less than 1% below the guidance range midpoint for this year. The mill feed grade averaged 8.2 grams per ton and the recovery rate was at 96.8%. As a result of the impacts of the COVID-19 outbreak and operational activities combined with performance issues with several stopes following the outbreak, we currently expect gold production rate in the second quarter grade to be below our guided range on an annual basis.

But based on our production forecast, we remain on track to be within our full-year production guidance range. To enhance our understanding of the high-grade variable deposit and improve the predictability of production we have increased the density of drill data we collect. Diamond drilling progressed through the quarter with six diamond drills in site conducting in filled and resource expansion drilling. The rate of drilling was reduced during the COVID outbreak but we still complete more than 39,000 meters of diamond drilling.

We are adding a seventh drill underground to catch up on our plan for the year. To optimize production and improve blending to balance quarter-to-quarter fluctuation, we have maintained an accelerated rate of underground development to improve underground access. The increased development rate, expand our access to new areas of the deposit and provides the phase to build an inventory of drilled off-stope. Our target is to add about 400,000 tons of drilled stope ready to be blasted by the end of the third quarter of 2021.

This is roughly equivalent to a full quarter of production. At the end of the first quarter we added 276,000 tonnes of drilled off-stope inventory versus a 23% increase from the previous quarter. Turning now to slide 13 we have a section view of the underground development looking North. Until this year mining have been limited to only two mining horizon at Brucejack and mining horizon consist of four mining level, each about 30 meters. However, this year we began production from the lower horizon on the 1080 level. We are now actively operating from three mining horizon. We are continuing to develop access into the fault zone, which is just West of the Brucejack Fault on the 1200 and 1320 levels, we expect to be mining from these two areas later this year.

This will increase access from mining from -- to five from three distinct area and will provide significantly more flexibility in terms of production compared to previous year.

Now, I will turn the call over to Matt for an overview of our financial performance.

Matthew Quinlan -- Vice President and Chief Financial Officer

Thanks Patrick. Our financial results were strong in the quarter. For the quarter, we realized an average gold price of one $1804 per ounce, an increase of 12% over the first quarter of 2020. Revenue increased to $142 million, a similar 12.5% increase compared to the first quarter of 2020 due to relatively consistent gold sales across both periods. In the first quarter 2021, we sold approximately 82,000 ounces of gold. EBITDA in the quarter was $68.1 million as compared to $56.3 million in the first quarter of 2020.

Net earnings and adjusted earnings were both $0.14 per share for the quarter, a significant increase over the $0.05 and $0.08 per share respectively in the first quarter of 2020. Net earnings increased primarily due to higher revenues, decreases in interest expense and deferred taxes, partially offset by increased production costs. We changed our definition of adjusted earnings and adjusted earnings per share, effective this quarter and all prior periods have been restated to reflect this new definition on Slide 16.

We have simplified our definition to make it more comparable to our peers, and as a result we're not adjusting for certain non-cash items in the new definition including deferred taxes and amortization of prior financing costs. Now, the end result of this is that our revised definition, lowered adjusted earnings per share by $0.08 in the first quarter when compared to the prior definition i.e., under the prior definition, our adjusted earnings per share would have been $0.22 per share in the quarter as this page shows. Lastly, a note on the MD&A, we've completely reformatted and rewritten this document in the first quarter with the aim of giving you, our shareholders, an improved understanding of our business results and outlook.

Turning to slide 17, the year-over-year increase in EBITDA helped drive cash flow from operations to $61 million for the quarter, an increase of approximately 20% over the first quarter of last year. Operating cash flows reflect the increase in production costs for the reasons noted by Pat, included the COVID-19 costs related to the ongoing prevention measures and the outbreak. Total capital expenditures in the quarter on a cash basis were $10.6 million. Free cash flow was $51 million as noted by Jacques for the quarter nearly a 22% increase over the first quarter last year. Liquidity, continued to grow in the quarter.

We ended the quarter with approximately $209 million in cash and available liquidity of approximately $369 million. Debt as of March 31 comprised primarily of bank debt of approximately $155 million and convertible notes of $100 million. Subsequent to the end of the quarter, we voluntarily repaid the entire remaining amount of $38 million of bank debt on our revolver, leaving the $200 million revolving portion of our facility undrawn.

Turning to Slide 18, all in sustaining cash costs in the quarter of $1005 were consistent with the comparative period in 2020. ASIC for the fourth quarter of 2020 was also consistent at $1,009 per ounce. As Pat noted, production costs increased relative to as a result of the strengthening Canadian dollar, COVID-19 costs partly offset by lower development costs. More favorable terms under our off-take agreements contributed to a saving compared to the prior year and as a result of the COVID outbreak in the quarter, levels of sustaining capitals were slightly lower than the prior year and most notably below our expectations. So, as a result, the all-in sustaining cash cost per ounce sold in the quarter was below our guidance range for the year that's something we don't expect to be the case for the balance of the year. So, turning to Slide 19 we are reaffirming our guidance ranges for 2021, both operationally and financially. As previously mentioned, we expect gold production in the second quarter to be below our guidance range on an annualized basis, however forecasted gold production and grade for the full year remains within guidance.

We expect to be at the top end of our guidance range of $55 million to $65 million for expansion capital and at the low end of our $50 million to $55 million range for sustaining capital. Levels of capital expenditures noted here in the first quarter reflect the effects of COVID but also please remember that the second and third quarters typically see higher levels of capital expenditures, due to the summer construction season at Brucejack.

With that, back to you Jacques.

Jacques Perron -- President, Chief Executive Officer and Director

Thanks Matt. The 2020 regional exploration program on the company's claims included a promising discovery of epithermal style gold mineralization at the Hanging Glacier Zone. The 2021 near-mine exploration program will focus on the Hanging Glacier Zone, which is easily accessible from Brucejack, a 10,000 meter surface drill program is planned for this summer to test the high-grade corridors. Additional near-mine exploration, this year will focus on the trend of highly altered outcrop that extends 4 kilometers from the Hanging Glacier Zone to the Northwest of Brucejack to the Bridge Zone to the Southeast.

In addition to the exploration work 8,000 meters of surface drilling is planned to test these zones surrounding Brucejack. This program is expected to start at the end of the second quarter. The 2021 Brucejack definition and expansion drill program is anticipated to total approximately 195,000 meters of drilling comprised of reserve definition 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 and were deployed underground and as Patrick mentioned seven has been added to catch up. During the summer, two surface drills will be added. In 2020, we completed about 28,000 meters of resource expansion drilling outside the resource shale to the North of the Valley of the Kings zone. This is the first time resource expansion drilling was conducted at Brucejack since production started. You're looking at Slide 23 is a cross-section of the VoK deposit and our underground infrastructure looking West.

The results from the North Block 2020 resource expansion drill program intercepted high-grade gold as far as 300 meters from the current resource shell and as high as 2,590 grams per ton gold over one-meter. As we reported earlier this week, in 2020 we also completed about 14,000 meters of resource expansion drilling outside of the resource shell from the 1080 level to the East-West and at depth below the VoK deposit. Here looking at Slide 24 is another cross section of the VoK, this time looking North. The results from the 1080 level drill program included high-grade gold as far as 200 meters below and 200 meters east of the current resource shell and as high as 1,635 grams per ton gold over one meter.

The results from the North Block Zone and the 1080 level continue to highlight the potential to expand beyond the Valley of the Kings deposit. We intend to continue resource expansion drilling through 2021 with 82,000 meters of drilling planned, follow up drilling within the North Zone and 1080 level is currently under way with 24,000 meters already completed. Assays results are pending. Stay tuned.

Looking ahead to the rest of 2021, we will continue to emphasize safety. 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 which will be used in part to reduce debt. We look forward to continuing to announce drill results. 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 with the intention of growing our existing resources.

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

Questions and Answers:

Operator

Thank you. [Operator Instructions] The first question comes from Ovais Habib from Scotiabank. Please go ahead.

Ovais Habib -- Scotia Capital Inc -- Analyst

Thanks operator. Hi Jacques and Patrick and team and thanks for taking my questions.

Jacques Perron -- President, Chief Executive Officer and Director

Good morning Ovais.

Ovais Habib -- Scotia Capital Inc -- Analyst

Hi, and just a couple of quick questions from me. I believe you kind of touched upon the all in sustaining cost, obviously they were lower in Q1 due to COVID. Now, will we see a little bit of a catch-up over here on these costs remaining quarters for the year or is it going to get kind of pushed out as we go quarter-over-quarter into 2022?

Matthew Quinlan -- Vice President and Chief Financial Officer

I think the best way to look at it Ovais is we're reaffirming our guidance for the year. So, we were below that range so I think you should use just the guidance for the year, going out. We think we're going to be within the guidance for the year -- I think that's the easiest way to answer that question, and it was really the sustaining capital levels in the quarter that resulted for us being below guidance in the first quarter.

Ovais Habib -- Scotia Capital Inc -- Analyst

Sounds good. Just wanted to double check on that and then just moving on to -- obviously there was a lot of drilling done in Q1, I believe 40,000 meters -- a lot of that was infill as well, any kind of color you can provide in terms of those infill results how they fared out compared to your expectations?

Patrick Godin -- Vice President and Chief Operating Officer

Actually the drilling is going well, not as fast as we expect to us because -- mainly because we're impacted by COVID but actually we are in all the result -- we have a lag between the laboratory result and the drilling, so it will be -- the result will show up more in Q2 than Q1 actually.

Ovais Habib -- Scotia Capital Inc -- Analyst

Okay. And just moving on in terms of -- you did mention that there were some -- Q2 is going to be impacted by some performance issues on some of stopes, any color you can provide maybe I missed it and you've kind of touched upon it, any color you can provide us as to what those issues you're having, and what are you guys doing in terms of mitigating any future occurrences?

Patrick Godin -- Vice President and Chief Operating Officer

Mainly on this one, what is happening is first is that we have the two or two or three stopes the grade that we have actually after all the mining and the definition drilling and the grade control that is lower that we expect and basically it's good result, and it's impacting more -- it will impact more in Q2 because it's a stope that we developed Q1, we will be below the low end by few thousand ounces, but we have nothing to panic here. Actually we are in the range of the variability of the reserves, accuracy with the ore body that we have.

Ovais Habib -- Scotia Capital Inc -- Analyst

Okay, sounds good. And just final one from me and then maybe I'll jump back into the queue. In terms of your underground development that seems to be advancing pretty well at the end of Q1, you guys had approximately about 2.5 months of drilled stope inventory versus like one or two weeks of stope inventory same time last year. You were talking about getting closer to that 4 months of drill stope inventory -- in terms of this whole situation with COVID, do you guys think that you guys are on track on that front? I mean, obviously things seem to be moving pretty well.

Patrick Godin -- Vice President and Chief Operating Officer

Because it's important for all of us to have enough inventory to succeed and to mitigate the variability of this ore body and it's something that we want to keep the pressure and goes full steam ahead to achieve this objective because it's important for us. I can say to you that we're impacted by COVID big time at some stage -- sometimes we had more than three people in resolution at site and 14 were impacted by COVID -- infected so it impacts us, but they worked really well, we prioritize our activities and we focus on the KPIs and actually I'm pleased because the results are not fully showing all the efforts that were invested by our guys in the field so they did an amazing job and actually we still think that we can catch it up and actually we are on the way to do this.

Ovais Habib -- Scotia Capital Inc -- Analyst

Perfect. Again, that's it from me and thanks for taking my questions.

Jacques Perron -- President, Chief Executive Officer and Director

Thank you Ovais.

Operator

Our next question comes from Heiko Ihle from HC Wainwright, please go ahead.

Heiko Ihle -- HC Wainwright -- Analyst

Hey there. Thanks for taking my questions. I'm going to maybe build on question that was just asked, it looks like your all-in sustaining cost was $1,005 per ounce and this is a quote from your release you incurred reduced levels of sustaining capital expenditures relative to expectations, which lowered the all in sustaining costs below guidance range, but then you go on to say that you don't expect all-in sustaining costs to be below the guidance range for balance of the year.

Nonetheless you left the overall guidance for the year unchanged. We're halfway through Q2 and maybe I'm reading a whole bunch into nothing here, but is there some delayed spend or should we in theory could we take the midpoint of guidance for Q2 to Q4 and then the actuals for Q1, is there anything we're missing or has anything changed on your end that implicitly it took the guidance up slightly for Q2 Q3 and Q4?

Jacques Perron -- President, Chief Executive Officer and Director

I think I think I go -- the reason why our sustaining capex is lower in the first quarter is, we didn't do all the drilling that we wanted to do and the development that we wanted to do, so that reduced, but now as Pat mentioned, we introduced the seventh drill underground. We are pushing hard on development to catch up. We had good performance on development in Q1, but honestly we were expecting to do a lot better than that. Similar for production, we're almost at 3800 tons per day, but we were hoping to be a little bit or above 3800 tons per day. So, our activities were impacted -- so our level of spending was impacted.

So in the next quarter, we're going to play catch-up to get to the end of the year where we were supposed to be in our original plan. So in the coming quarters we'll spend at more money. Our hope is that at the end of the year we're back on track with our plan, so you know our ASIC costs and production will be within our guidance range so it's really the message. And I think the message that we want to convey here is -- and this is my fifth quarterly conference call with the company and I've said this many, many times. It is a variable ore body, we're going to have ups and downs, we have risk of COVID. So things are going to -- they're not going to be flat, all the time there's going to be ups and downs but I think what we are trying to do is make sure that we don't surprise anyone.

That was a comment we hear in the past, we always get surprised, we always get surprised and we're trying not to surprise anybody. We're laying it out there. Q2 is going to be -- not as good as Q1 in terms of production, but we're still confident in our guidance. We're still confident our costs will be in line with what we were expecting so we're not panicking here if things are good. We said many times that we could get the quarter that is not as good as the other ones and that's going to be Q2 this year.

Heiko Ihle -- HC Wainwright -- Analyst

You mentioned how this is your fifth call as a decent lead over into my next question. Given that I have asked the same question on the past one of these calls before but that was under the old management team, your new CFO has now been on the job since September. So over half a year and on that note, congratulations to Matthew. But, if you maybe want to just give us some color on your minimum level of cash that you'd like to keep on your balance sheet again with the new management team obviously, and at what point of time you'd consider returning some incremental capital to shareholders whether through a buyback or a dividend, please?

Jacques Perron -- President, Chief Executive Officer and Director

We are in the same situation as we said before, priorities for us is one, keep $100 million of cash on the balance sheet at all times. So we want to do that especially during COVID. We want to have the cash if we need to adjust or if we have disruptions at site because of COVID. So we think three months of spendings -- expenditures for the operation and the company that's what we want to have on the balance sheet at all times. We also want to make sure that when we get to Q1 2020 at -- 2022 sorry when we get into Q1 2022 that we have $200 million of cash on the balance sheet because we will have to pay $100 million for the convert that matures at the end of March 2022 and we want to keep $100 million of cash, we need to have $200 million at that point, between now and then it's a reducing our debt.

We are paying $17 million a quarter, we made a discretionary payment of $38 million this quarter, and we still have another $100 million plus of term loan debt that we need to continue to deal with, so that's our priority. Once we get there and hopefully COVID is kind of behind us. I'm not too sure about that but anyway we'll see when we get there, that's when we're going to start to think about what do we do in terms of capital allocation, reinvesting in the business, returning money to shareholders in different forms. But until then, our priority is reducing our debt, and maintaining a sound cash balance at all times.

Heiko Ihle -- HC Wainwright -- Analyst

Great. And once again a decent layover -- just a quick clarification, you had the outbreak -- the COVID outbreak in February and March obviously, and that was the last time there was even just a single positive case at site correct there have been zero across your workforce, since then right?

Jacques Perron -- President, Chief Executive Officer and Director

We had zero -- starting in mid-March, we went down to zero, we were at zero for the last, the following. I think it's 4 weeks or 5 weeks. And about 10 days ago one employee that came to site -- so we test all the employees as they arrive at site and he tested positive. So, there is one person currency in isolation that is positive and I believe that person is going to come out of isolation in the next couple of days. So May 6, the person is coming out of isolation, so at that point, we'll have no cases at site.

So, it's really well managed Heiko, we test people when they -- before they take the plane in Vancouver and we test other people that don't fly from Vancouver they get tested as soon as they arrive at site with the rapid antigen test. So, we get the results within a few minutes; starting this week, we're going to start to test people at the Paris Airport and also at our Smithers office people that bus the site. So, everybody will be tested prior to coming to site with only a few exceptions, so we will completely insulate the site from COVID cases. So, if someone tests positive before they travel by plane or by bus, so they'll return home and go quarantine at their personal residence.

Patrick Godin -- Vice President and Chief Operating Officer

In addition too, with the support of Northern Health we also started vaccination at site. And actually we have the AstraZeneca that is available for our employees and starting today, we will provide -- give the vaccine for the people who want to have it for the people who are higher than 30 years old. So it's improving the situation at site actually.

Heiko Ihle -- HC Wainwright -- Analyst

Very good. Well, I hope that the worker that comes out of quarantine tomorrow feels good and fine and I wish him the best in getting better. Thank you all so much. Okay. Thank you Heiko.

Operator

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

Anita Soni -- CIBC World Markets -- Analyst

Good morning guys. So my first question is just regards to the commentary in the release, in the MD&A about performance of certain stopes in Q1. Could you just elaborate on that I'm kind of having a little bit of trouble understanding what you mean by that?

Patrick Godin -- Vice President and Chief Operating Officer

What that means is...

Anita Soni -- CIBC World Markets -- Analyst

With respect to the grade variability being that it's going to be variable in Q2 given that there was some performance-related issues in stopes in Q1.

Patrick Godin -- Vice President and Chief Operating Officer

Yeah, just to be relative and to bring some colors, we are mining -- we mined 69 stopes for the year -- entering the year. So we have multiple stopes, so it means that we are mining more or less 15 to 16 stopes per quarter. In the stope that we developed in Q1, we have three stopes in volume and tons in ore and grade when we did the definition that the grade -- the head grade that is after grade control is lower than what we expect in the reserves. Sometimes, it's by 2 grams, sometimes it's by 4 grams. So we're not losing everything but as they are representing a good volume in terms of tonnage for the quarter so it will slightly have less production that we expect during the quarter.

It's part of the variability of the ore body you know and with this ore body we now get effect -- so sometimes we have positives, sometimes we get negatives, and we are still in the range of the reconciliation of the reserve that we presented to you at the end of the year. So basically it will be a few thousand ounces, but we're not panicking, it just mean it's not coming from one area.

So the stopes are spread, more or less three stopes are in different area of the mine so we're not seeing a trend here, so it's more local and more a function of [Indecipherable] of the ore body.

Anita Soni -- CIBC World Markets -- Analyst

Okay. That was going to be my follow-up question if it wasn't specific area, but it sounds like it's not and then secondly, I just wanted to ask on your comments on capital allocation. So, you talked about after you paid down your debt and getting your cash balance to where we want it to be, you wanted to reinvest in the business and then also return capital to shareholders in various forms. So, could you just elaborate me by what you mean by reinvest in the business, does this mean that you're going to look to developing satellite deposits, look to drill more, look to diversify your cash flows through M&A? Thank you.

Jacques Perron -- President, Chief Executive Officer and Director

Yeah, I, Anita maybe all of the above, but we are drilling a lot this year and we're excited by what we're seeing right now, with our results and already this year we issued two great press releases. Last year, we issued another great press release on Hanging Glacier depending on what we're going to get from the drilling, we're going to do this year, we may decide -- and this is just -- I'm just giving an example earlier if we're very successful at Hanging Glacier, and we may decide to start to put money there to have a satellite ore body that would feed the mill and two, three years down the road but I'm not saying that's what we're going to do, but I'm just giving you example. So, it's difficult for us to say exactly what we intend, but to do -- but the results are so good everywhere we drill right now, we hit gold.

So the results are so encouraging that we kind of expect that when we got all the results together, we're going to be compelled to invest money in some parts of the ore body to advance the development. So that's one area that we're looking at for sure. We're getting good results from the North Block -- the North Block is very close to our infrastructure. It's currently not in the reserve, and not in the resource so it's not in our overall plan in terms of capex, but we may decide when we put the budget together for next year. We may decide that we're going to accelerate the North Block because the results are good and the grades are really good. So, we may decide to push on that one sooner than later, so those are the type of reinvestment that we're going to be thinking for Brucejack and we'll see what else shows up and where we have to put money.

We know if we don't have any good projects or good investments for the cash that we have for sure there might be a higher percentage of our cash flow that goes back to shareholder. If we do have good projects -- probably going to be a lower percentage or maybe not even anything and that's the discussions that it's not management will make that final decision, it's a Board decision dividends or share buybacks or that type of instruments will be considered when we get there.

Anita Soni -- CIBC World Markets -- Analyst

Okay. And then I wanted to follow up with one second question on the drilling that you guys are doing; can you just give me some color on the things that you are doing differently with the drilling versus the I guess the -- what led to the issues at Brucejack with the reconciliation having to use the mine call factor. So, just trying to get an understanding as you look at this thing, are you taking into account the challenges that the original ore body had when developing this geological model?

Patrick Godin -- Vice President and Chief Operating Officer

Yeah, I think what we're doing differently Anita is basically the density of data, the density of drilling, it's a negative deposit and when it's drilled widely you have some local issues and estimating the grade, the global resource -- you can probably get a decent number but in locally it's very challenging when you don't have the level of drilling that is required. So, basically what we're doing is we're drilling a lot more with diamond drills and of the areas that we want to develop, but also we're adding to this, the RC drilling. When we get closer to those zones and zones that are a little more complex and we continue to do with the RC drilling initially -- it started as a task in 2020 and of 2019 and 2020.

Now, we have two RC drills dedicated to definition drilling that are providing us very good value and the mix of diamond drilling with RC drilling and production hole sampling is really helping us understand a lot better the local behavior of the various zones.

Anita Soni -- CIBC World Markets -- Analyst

And the last follow-up on that, I mean opinions on multiple indicator could we expect to see that going forward?

Jacques Perron -- President, Chief Executive Officer and Director

Yeah. At this time that's what we have to work the resource. We're going to continue to work with that, we are doing some analysis and tests of how they're going to approach this. But definitely in the VoK zone, we're going to continue to use the MIK or the NMIK [Phonetic] to understand the resource. In other zones where it's simpler, like the West zone, for example, it's more conventional resource estimation.

Anita Soni -- CIBC World Markets -- Analyst

Okay, thank you very much.

Operator

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

Joseph Reagor -- Roth Capital -- Analyst

Good morning guys, and congrats on good start to the year.

Jacques Perron -- President, Chief Executive Officer and Director

Thank you Joe.

Joseph Reagor -- Roth Capital -- Analyst

So, most of my questions have already been answered, but maybe just on the guide that you gave for Q2, what kind of magnitude below the annual guidance, are you guys expecting -- annual guide divided by four in the low-end would be about 81,000 ounces and change. Are we talking a few thousand ounces lower than that, are we talking 10% 15% below that like just so we have a rough idea.

Jacques Perron -- President, Chief Executive Officer and Director

As Pat said Joe, it's a few thousand ounces.

Joseph Reagor -- Roth Capital -- Analyst

Okay.

Jacques Perron -- President, Chief Executive Officer and Director

Now that being said Joe, as you know, mining is always a very interesting business, it's always possible that we try to give the best information, but it's possible that we have a stope that comes out much higher grade than predicted are lower -- these things can always happen. But right now based on where we are, what we understand, it's a few thousand ounces.

Joseph Reagor -- Roth Capital -- Analyst

Okay, all right. That's fair enough. Right. And then on the debt front, are you guys actively looking at potentially like refinancing out the remainder of your debt or is it just a focus of paying it all off to get debt free?

Matthew Quinlan -- Vice President and Chief Financial Officer

It's Matthew here speaking. Thanks for the question. We do have a supportive bank syndicate that revolver matures in December of 2022 and we're going to be looking to refinance that and extend that revolver in term loan with our support group of banks in the coming months. So stay tuned.

Joseph Reagor -- Roth Capital -- Analyst

Okay. Thanks.

Operator

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

Andrew Mikitchook -- BMO Capital Markets -- Analyst

Thank you. Congratulations on a good quarter. Lots of great questions have already been asked. Can we just get a little bit of color on throughputs -- even with the COVID impacting what looks like almost half of your quarter you had very strong throughputs in Q1 is that -- did you have any period in that time where throughputs came down and then you're able to catch up or were your teams essentially able to keep the mill essentially full. I know you've already commented, you're hoping to be slightly further on a tons per day than what you did, but can you give us a sense of what the impact was in Q1, please?

Patrick Godin -- Vice President and Chief Operating Officer

Yes. So, in Q1 we were close to the objective we plan 3800, so we were close by. Going forward we have the capacity to catch up what we missed in Q1. So it's not necessarily a problem so we are actually -- our plan is to forecast up to the maximum that is authorized by the permit is 1,387,000 ounces -- tons sorry, ounces are going to be totally different.

But in terms of tons, we have no restriction in the mill, the mill something that is well designed, the mill is robust, the mill is having over capacity, and the recovery is -- we are improving in terms of recoveries, so we are watching the tails grade and I think -- something that is robust at the site is the mill so have no issue and no concern with the mill performance going forward.

Jacques Perron -- President, Chief Executive Officer and Director

We had -- Andrew. We had to reduce throughput for about three weeks. There was a period of three weeks where we took the throughput, which is -- so we operate at about 4,000 tons a day. When you apply the mechanical availability, it gives you at 3800 and for about three weeks we were more like the 3,000 ton per day. And then when the workforce was back and we were able to ready the mill could have done more, but it's just because of all the people we have in quarantine and isolation, we just couldn't bring the tons to surface that keep the mill going at full throughput, but when people were back on the scoops and the trucks, we had days we were running easy at 4200 tons, 4300 tons a day.

Andrew Mikitchook -- BMO Capital Markets -- Analyst

Okay. And one thing sometimes we see here is kind of delayed maintenance when you're trying to catch up is, should -- did that occur or could there -- are you guys going to come back in the balance of the year telling us we took a week's maintenance because it didn't happen in Q1?

Patrick Godin -- Vice President and Chief Operating Officer

No, we are right on the -- we are respecting preventative maintenance schedules and we never skip any maintenance in the mill or elsewhere.

Andrew Mikitchook -- BMO Capital Markets -- Analyst

Okay, just very quick last question I think it's been asked over and over again, you guys have answered in quite a bit of detail, but Q2 the miss is from all of your commentary is essentially grade related like you guys demonstrated in Q1. You're not expecting a throughput miss in Q2, it's just the sequencing and great variability that's giving you the slight miss in Q2?

Jacques Perron -- President, Chief Executive Officer and Director

You're correct Andrew, our mill can process tons and the mine can feed tons because as we said, we had at the end of the quarter, 270,000 tons of inventory so we have the tons. What we're not doing anymore, is something that we've changed is we're not jeopardizing the sequence. We're not jumping around left and right and doing all kinds of crazy things just to meet grade. We have a sequence, we want to mine property, we want to mine the right way, we want to make sure we don't generate rock mechanics issues long term, so we're not jumping around and this was a problem that was happening in the past and we said, we're not doing this, so we're following the sequence, we have the tons. But sometimes, as Pat mentioned, we have stopes that grade is a little lower than what was expected and that's going to impact our grade, but we are following the sequence and as we said, we continue to be confident in our guidance for the year.

Andrew Mikitchook -- BMO Capital Markets -- Analyst

Okay. That's end of my questions. Thank you very much for all your comments.

Jacques Perron -- President, Chief Executive Officer and Director

Thank you Andrew.

Operator

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

Don DeMarco -- National Bank Financial -- Analyst

Thank you for taking my call. Hi gentlemen. Maybe just one more run at the exploration success that you've been having. Could you comment or compare where you see the most upside with the highest priority might be or potential timing to production between the 1080 level or the North Block, I see them both in close proximity to the mine.

Patrick Godin -- Vice President and Chief Operating Officer

For this, we need to complete to the definition, but the North Block is close by so it's -- and it's a pretty -- it's pretty promising, -- it's a nice one that we will -- we are actually doing the second phase of drilling in the North Block so that's something that's interesting. As we go down with around in 1080 [Indecipherable] is really close by. So, in terms of our priorities, it's difficult for me to schedule out with you, but it will be closed in the pipeline, don't worry and actually we are also working on West Zone so we're doing the drilling in the West Zone, so we anticipate the work as much as we can. So, it will be probably we'll see we'll have access in this type of zone this year in the mining plan.

Don DeMarco -- National Bank Financial -- Analyst

Okay. And I guess that's my next question with all these developments. Can you confirm that's what your plan is indeed to issue a technical report with the new mine plan next year at some point?

Patrick Godin -- Vice President and Chief Operating Officer

Yes, we are sticking to the plan and we want to release a new 43-101 report for the first half of 2022.

Don DeMarco -- National Bank Financial -- Analyst

Okay. And based on what you're seeing right now in the North Block and the 1080 we reckon West Zone grades might ease slightly compared to the value at Kings, is there any chance that you might defer production from the West Zone and prioritize more on some of these newer developments that you see in expanding the Valley of Kings?

Jacques Perron -- President, Chief Executive Officer and Director

It is possible Don that we decided to prioritize North Block or 1080 compared to West Zone but again this year we also have a drilling program in the West Zone and we'll see once we get there. Depending on the results we'll get from the West Zone and what we get from North Block and 1080 we'll have to make decisions, we won't be able to go everywhere at the same time. But, I wouldn't discount the West Zone just yet. There is interesting things in the West Zone. If you go back to the old 43-101 there is the R8 structure that develops us very high gold grade at depth and so again that as Patrick said more to come with drilling results. We have a very exciting year of drilling -- a very, very exciting year of drilling, very good targets. As I said stay tuned because there might be some very interesting news coming out in the future.

Don DeMarco -- National Bank Financial -- Analyst

Okay, great. Well, we'll keep an eye on those. Thanks for that Jacques and we also look forward to the updated technical report next year. Thanks again.

Jacques Perron -- President, Chief Executive Officer and Director

Thanks Don. Have a good day.

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 all the questions. We tried hard to make sure that you understand that we want to deliver on what we promise and we want to meet our guidance for this year and we're on track to do that. We want to make sure that we avoid surprising the market so we're doing that, so things are moving in the right direction. We have a lot of work ahead of us to achieve all our objectives for this year, but as, we said, we are on track to do what we want to do. There is a number of initiatives under way, and we look forward to updating you on the results of everything we're going to do in Q2 and Q3. And once again, I want to conclude the call by thanking the entire Pretium team for their dedication and hard work, as we continue to operate through these very challenging times.

So thank you very much everybody stay safe and we'll talk to you soon. Bye now.

Operator

[Operator Closing Remarks]

Duration: 16 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

Ovais Habib -- Scotia Capital Inc -- Analyst

Heiko Ihle -- HC Wainwright -- Analyst

Anita Soni -- CIBC World Markets -- Analyst

Joseph Reagor -- Roth Capital -- Analyst

Andrew Mikitchook -- BMO Capital Markets -- Analyst

Don DeMarco -- National Bank Financial -- Analyst

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