Bear Creek Mining Reports Q2 2023 Financial and Operating Results

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Bear Creek Mining reports Q2 2023 financial results, with a 23% reduction in mining costs per tonne of ore mined. However, lower than planned grades have negatively affected cash cost and AISC per ounce. The company's 2023 annual production guidance is being revised to 45,000 - 55,000 ounces gold production. Bear Creek has made improvements to its financial liquidity by restructuring debt and streaming obligations. The Mercedes Mine had no lost time incidents or reportable environmental incidents during Q2 2023. The Company expects mining costs per tonne of ore mined to fall by another $3 to $5 by the end of 2023. Exploration drilling in the Marianas workings has shown encouraging results, indicating strong potential for additional ore. The Company recorded a comprehensive net loss of $7.6 million for Q2 2023. The Company held cash and cash equivalents of $5.0 million on June 30, 2023. Bear Creek closed a non-brokered private placement financing for gross proceeds of approximately C$8.2 million.

Positive

• 23% reduction in mining costs per tonne of ore mined
• Improvements to financial liquidity
• No lost time incidents or reportable environmental incidents during Q2 2023
• Encouraging results from exploration drilling in the Marianas workings

Negative

• Lower than planned grades affecting cash cost and AISC per ounce
• Revised 2023 annual production guidance
• Comprehensive net loss of $7.6 million for Q2 2023

Vancouver, British Columbia--(Newsfile Corp. - August 29, 2023) - Bear Creek Mining Corporation (TSXV: BCM) (OTCQX: BCEKF) (BVL: BCM) ("Bear Creek" or the "Company") reports its interim consolidated financial results for the three and six months ended June 30, 2023 ("Q2 2023"). Monetary amounts in this news release are in United States dollars unless otherwise stated.

This news release should be read in conjunction with the Company's interim consolidated financial statements and management discussion and analysis ("MD&A") for the three and six months ended June 30, 2023, which are available on SEDAR+ (www.sedarplus.ca) and the Company's website (www.bearcreekmining.com).

Overview

Bear Creek's 2023 business priorities are to improve the performance of the Mercedes Gold Mine in Sonora, Mexico ("Mercedes") and to improve the Company's financial condition. These priorities continued to be the focus of Bear Creek's activities during Q2 2023, with positive progress made on both fronts.

During Q2 2023, the Company undertook sweeping changes to the Mercedes operations by adding significant technical talent and subsequently implementing more productive mining methods tailored to the geological and structural characteristics of each of the current workings. These new mining methods and other cost efficiencies have significantly impacted Mining Costs per tonne of ore mined, which have declined by 23% from $80.84 in the first four months of 2023 to $61.96 for May and June 2023 (see "Non-GAAP Measures", below). Development meters also improved substantially, increasing 30% during Q2 2023 compared to the first quarter.

The Mercedes mine has been inconsistent in achieving the anticipated gold grades projected in the mine plans and geological models the Company inherited upon its acquisition of Mercedes in April 2022. Although the 23% reduction in mining costs per tonne is substantial, the lower than planned grades being mined has negatively affected the cash cost and AISC on a per ounce basis. Bear Creek has undertaken a complete review and rework of the geological interpretation of the Mercedes mine to understand the controls on mineralization better, improve the predictability of ore grades, and ultimately increase the grade of ore sent to the mill. Revisions to the reserve block modeling and mine sequencing are also in process. This work is expected to provide operating plans and forecasts with much higher confidence going forward. Accordingly, the Company advises that its 2023 annual production guidance, issued on February 24, 2023, is being revised to 45,000 - 55,000 ounces gold production. We expect to be able to incorporate this work and recent high grade drill intercepts into further updates and production estimates for 2023.

Eric Caba, President & CEO, states, "During Q2 2023 the Company felt the brunt of development work delays, operating performance challenges, inflationary pressures, and foreign exchange factors that transpired during the first quarter. I want to stress that we are actively working to address and mitigate these factors to improve the Mercedes operation and the Company's financial strength. While our timeline to achieve the production levels and cost structure that we originally envisioned for Mercedes has taken longer than anticipated, we continue to be very excited by the potential we see at Mercedes to increase annual production, discover new orebodies and expand existing ones, and to contribute significant free cash flow to the Company. Further supporting our strong optimism, development drilling is intersecting gold grades 2 to 10 times the current mining grades, often in parts of the ore bodies where access is being completed for near-term mining. We will update our 2023 production guidance again, once we are able to revise projections with greater confidence."

Recent improvements to the Company's financial liquidity were made by restructuring certain of its debt and streaming obligations. Most notably:

• On May 11, 2023, the Company announced it had amended the terms of the gold purchase agreement with Sandstorm Gold Ltd. ("Sandstorm") in return for a payment to the Company of $5 million. Additional details are provided below.

• On July 5, 2023, Bear Creek announced it had executed a restructuring agreement with Equinox Gold Corp. ("Equinox Gold") to convert a US$26 million current liability into a non-current obligation by issuing a five-year convertible promissory note (the "Note") at a competitive interest rate. Payment of the Note will satisfy the final purchase price installment (the "Deferred Payment") for Mercedes. Additional details of the Equinox debt restructuring agreement are provided below.

These balance sheet improvements give the Company the financial flexibility to focus Mercedes' cash flow on increasing gold production and growth initiatives at both Mercedes and the Corani silver project in Puno, Peru.

Selected Q2 2023 Financial and Production Results

Financial Results (thousands of dollars, except share and per share amounts)	Three Months Ended June 30, 2023	Six Months Ended June 30, 2023
Revenue	$19,889	$44,171
Comprehensive earnings (loss) after taxes	$(7,617)	$(19,260)
Comprehensive earnings (loss) per share (1)	$(0.05)	$(0.12)
Cash from (used in) operating activities		$7,465
Cash from (used in) investing activities		$(3,385)
Cash from (used in) financing activities		$(2,568)
Weighted average shares during period	154,640,386	154,584,909
Shares issued and outstanding at end of period		154,640,386

 

Mercedes Operating Highlights	Q2 2023
Gold ounces produced	9,212
Silver ounces produced	39,827
Gold Equivalent Ounces (2) ("GEOs") sold	10,132
Cash costs per GEO sold (3)	$1,337
AISC per GEO sold (3)	$1,646
Tonnes mined	121,490
Tonnes processed	125,135
Average gold grade mined (g/t)	2.75
Average gold grade processed (g/t)	2.42
Recovery rate gold	94.53%

 
(1) Per share amounts are based on weighted average shares during the period.
(2) GEOs comprise gold and silver, with silver ounces converted to an equivalent number of gold ounces at a ratio equivalent to the last LBMA PM price of gold and silver at the period end date. For Q2 2023, the silver to gold price ratio was 85:1.
(3) Non-GAAP Measure. Please see "Non-GAAP Measures" below for further information.
 

Mercedes Gold Mine, Mexico

Safety
The Mercedes Mine had no lost time incidents ("LTI"), restricted work or medical treatment accidents during Q2 2023. The Mercedes Mine reached one year without an LTI during the third quarter of 2022 and has maintained that status to date. No reportable environmental incidents occurred during Q2 2023.

Mine Plan and Development
During Q2 2023, the Company revised the mining methods employed at the Marianas and San Martin deposits, from cut and fill mining at both deposits to room and pillar mining at San Martin and sub-level caving and sub-level stoping at Marianas. The use of long-hole open stoping was also increased in the remaining operating areas. These methodologies better align with the structural and geologic characteristics of these deposits, are less costly and, in the case of room and pillar mining, less dilutive. Mining Costs per tonne of ore mined have declined by 23% in recent months and the Company expects them to fall by another $3 to $5 per tonne of ore mined by the end of 2023.

The factors impeding development in the first quarter and into early Q2 2023 were substantially improved in the second half of Q2 2023, leading to a 30% increase in development advances quarter over quarter. Use of the bulk mining methodologies the Company shifted to in Q2 2023, as described above, increases the efficiency of the development work as more tons of ore become available per meter of development. This effectively leverages the same development to greater effect and contributes to lower operating and all-in sustaining costs.

The San Martin deposit is expected to be a significant contributor to Mercedes' gold production through the remainder of 2023, with tonnes mined doubling from 400 to 800 tonnes per day during Q3 2023 as the available working faces increase and the mining advances into the higher-grade core of the deposit. Development work and production is also expected to commence from the high grade Rey de Oro deposit in the coming weeks, which will provide additional working faces and mill feed.

During Q2 2023, 9,211 ounces of gold and 39,827 ounces of silver were produced at Mercedes. While the development improvements and new mining methods improve the outlook for Mercedes during the remainder of the year, production from Mercedes during Q2 2023 was directly impacted by the operating and development work challenges experienced in the first quarter and, consequently, was below the guidance forecasted for Q2 2023.

Exploration
Exploration drilling was delayed during Q2 2023 as the Company focused on operating efficiencies and recovering development advances within the mines. Delineation drilling in the Marianas workings has continued to show very encouraging results. The discovery of a number of new veins and the intersection of zones of intense structural complexity, including hydrothermal breccias that contain gold mineralization at significantly higher grades than the current reserve grade, suggest that the higher temperature sources of mineralization are being approached. This indicates strong potential for additional ore along strike and at depth. Geological interpretation of Marianas is ongoing to better understand the deposit's nature and significant upside potential.

Exploration drilling in the Marianas Deep, Marianas Extension, and the San Martin Displacement zones is scheduled to restart in Q3 2023.

Overview of Results of Operations, Liquidity, and Capital Resources

Results of Operations
For the three months ended June 30, 2023, the Company recorded revenue of $19.9 million from the sale of gold and silver. The Company sold a total of 10,132 GEOs at an average price of $1,963/GEO. The cost of goods sold was $14.6 million, and depletion, amortization, and depreciation amounted to $8.6 million.

The gross loss from Mercedes operations was $3.3 million during Q2 2023. Operations were negatively impacted by inflationary pressures on direct consumable costs (primarily diesel, tires, lubricants, explosives, and cement), indirect costs (supplies and services), and the Mexican peso's strengthening against the US dollar. Spending on the Corani property totaled $1.9 million during Q2 2022, comprising direct project expenditures and corporate overhead costs. After all operating expenses, other income and expenses, tax expenses, and recoveries, the Company recorded a comprehensive net loss of $7.6 million ($0.05 per share) for the three months ended June 30, 2023.

Liquidity
On June 30, 2023 the Company held cash and cash equivalents and short terms investments in the amount of $5.0 million (not including $1.7 million in restricted cash), an increase of $1.5 million from December 31, 2022. For the six months ending June 30, 2023, operating activities resulted in a cash inflow of $7.5 million, investing activities used $3.4 million, and financing activities used $2.6 million in cash.

On June 30, 2023, the Company's net working capital deficiency was $57.5 million (compared to $60.0 million on March 31, 2023 and $51.2 million on December 31, 2022). Significant amounts contributing to the June 30, 2023 net working capital deficiency are current amounts owing in relation to the final Mercedes mine acquisition payment, accounts payable, and deferred revenue plus streams.

After the end of Q2 2023, the Company closed a non-brokered private placement financing pursuant to which 16,725,000 common shares of the Company were sold at a price of C$0.49 per share for gross proceeds of approximately C$8.2 million. Additional information is provided in the Company's news release dated July 21, 2023.

Amended Gold Purchase Agreement
During Q2 2023 Sandstorm advanced the Company an additional US$5 million pursuant to an amendment to the gold purchase agreement (the "Gold Purchase Agreement") between the two parties dated December 17, 2022 (see Bear Creek Mining news releases dated December 17, 2022 and May 11, 2023). In exchange for the additional cash payment, the amended Gold Purchase Agreement extends the Company's delivery to Sandstorm of 600 ounces of gold per month by an additional seven months (a new total of 29,400 ounces over 49 months) at a price equal to 7.5% of the spot gold price at the time of delivery. All other delivery and payment terms of the Gold Purchase Agreement remain the same. A total of 8,400 ounces of gold have been sold to Sandstorm pursuant to the Gold Purchase Agreement as of June 30, 2023. No delivery or payment amendments have been made to Bear Creek's additional gold and silver stream agreement with Nomad Royalty Co. Ltd. ("Nomad," a wholly owned subsidiary of Sandstorm). See below for additional information about the Nomad gold stream.

Restructuring of Deferred Payment
As described above and in the Company's news releases dated May 30, 2023 and July 5, 2023, Bear Creek entered into an agreement (the "Agreement") dated June 30, 2023 with Premier Gold Mines Limited ("Premier"), a subsidiary of Equinox Gold, to convert approximately US$26 million (the "Principal") in near-term payment obligations into a five-year convertible promissory note with an interest rate of 7% per year (the "Note"). Payment of the Note will satisfy the final purchase price installment (the "Deferred Payment") for the Mercedes mine. Issuing the Note is subject to compliance with applicable Canadian securities laws, the receipt of Shareholder Approval (as defined below), and TSX Venture Exchange ("TSXV") acceptance. The Company intends to hold a meeting of its shareholders (the "Special Meeting") on September 21, 2023 to obtain disinterested shareholder approval for the Note ("Shareholder Approval"). If Shareholder Approval is not received at the Special Meeting, the Note will not be issued, and the Company's obligations to pay the Deferred Payment will remain in full force and effect. Additional details are provided in the Bear Creek Mining news release dated July 5, 2023.

Upcoming conclusion of stream
As part of its acquisition of Mercedes on April 21, 2022, the Company assumed a gold prepay agreement with Nomad, requiring the Company to deliver between 900 and 1,100 ounces of gold per quarter, depending on the price of gold. At the time of the Company's assumption of this gold stream, 5,400 ounces remained to be delivered to Nomad under the stream. On June 30, 2023, 900 ounces of gold remain to be delivered, and the Company expects this stream to be concluded in the third quarter of 2023. Conclusion of the Nomad gold stream will reduce Mercedes' gold stream burden by 33%, from 2,700 ounces to 1,800 per quarter.

Going Concern
The Company's Q2 2023 interim consolidated financial statements were prepared following accounting principles applicable to a going concern, which assumes the Company will be able to continue in operation for at least twelve months from June 30, 2023 and will be able to realize its assets and discharge its liabilities in the ordinary course of operations. While the addition of cash from the Gold Purchase Agreement amendment and the July 2023 private placement financing and the renegotiation of the terms of the $26 million Equinox payment improves the Company's liquidity, material uncertainty remains about the ability of the Company to achieve the operating results and necessary cash flow generation from the Mercedes mine to avoid seeking additional financing, which may give rise to significant doubt about the Company's ability to continue as a going concern.

Non-GAAP Measures

This news release includes disclosure of certain non-GAAP financial measures or ratios, as such terms are used in National Instrument 52-112 - Non-GAAP and Other Financial Measures Disclosure, including AISC, Cash Costs, AISC per GEO sold, Cash Cost per GEO sold, and Mining Cost per tonne of ore mined. The non-GAAP financial measures used in this news release are not standardized financial measures under IFRS and might not be comparable to similar measures presented by other companies. The Company believes that these measures and ratios provide investors with an improved ability to evaluate the prospects of the Company. For further information regarding these Non-GAAP financial measures, please see the information under the heading "Cash Cost and All-in-Sustaining Cost ("AISC") for Mercedes" in the Company's Management Discussion and Analysis for the period ended June 30, 2023, available on its website (www.bearcreekmining.com) and on SEDAR+ (www.sedar.com).

On behalf of the Board of Directors,

Eric Caba
President and Chief Executive Officer

For further information contact:
Barbara Henderson - VP Corporate Communications
Direct: 604-628-1111
E-mail: barb@bearcreekmining.com
www.bearcreekmining.com

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NI 43-101 Disclosure
Unless otherwise indicated, scientific and technical information in this news release is based on work programs and initiatives conducted under the supervision of, and/or has been reviewed and approved by, Andrew Swarthout, AIPG Certified Professional Geologist, a director of the Company who is a Qualified Person ("QP") as defined in NI 43-101. Additional information related to the Mercedes Mine and the Corani Project, including the Quality Assurance and Quality Control measures applied to the Company's sampling and assaying practices, is available in its Annual Information Form for the year ended December 31, 2022, available on its website and on SEDAR+.

Cautionary Statement Regarding Forward-Looking Information
This news release contains forward-looking statements regarding: the Company's 2023 business priorities; the information intended to result from the Mercedes geological interpretation review; the expectation that 2023 production guidance will be updated following completion of the geological interpretation review, reserve block modelling and mine sequencing revisions; the Company's expectations regarding future production and financial results; anticipated impacts stemming from the Gold Purchase Agreement amendments and Deferred Payment restructuring; TSXV, securities laws, and, Shareholder Approval of the Note; the potential conversion, in accordance with the terms of the Note, of the amounts owing in respect of the Deferred Payment into common shares of the Company; the ability of the Company to meet the monthly payments, interest and principal repayment obligations under the Note; the anticipated effect of the Note on the Company's financial condition; anticipated 2023 Mercedes drilling plans; the progression and timing of development work at the Mercedes mine; expectations regarding ongoing reductions in operating cost per tonne of ore mined at Mercedes through 2023; the expected contributions of ore from San Martin and Re de Oro and the timing thereof; the expectation that Mercedes will generate free cash flow; the Company's ability to remain a going concern; the anticipated conclusion of the Nomad gold stream; and the Company's ability to meet its debt and streamlining obligations, including payments in respect of the Note. These forward-looking statements are provided as of the date of this news release and reflect predictions, expectations, or beliefs regarding future events based on the Company's beliefs at the time the statements were made, as well as various assumptions made by and information currently available to them. In making the forward-looking statements included in this news release, the Company has applied several material assumptions, including, but not limited to: that the TSX Venture Exchange will approve the Note; that unforeseen factors will not impede the anticipated performance of the Mercedes mine; that development work at Mercedes will continue as planned and result in contributions to production as anticipated; and that exploration drilling plans will transpire as and when predicted. Although management considers this assumption to be reasonable based on the information available to it, it may prove to be incorrect. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and the risk exists that estimates, forecasts, projections, and other forward-looking statements will not be achieved or that assumptions on which they are based do not reflect future experience. We caution readers not to place undue reliance on these forward-looking statements as several important factors could cause the actual outcomes to differ materially from the expectations expressed in them. These risk factors may be generally stated as the risk that the assumptions expressed above do not occur, but may include additional risks as described in the Company's latest Annual Information Form, and other disclosure documents filed by the Company on SEDAR+. The foregoing list of factors that may affect future results is not exhaustive. Investors and others should carefully consider the foregoing factors and other uncertainties and potential events. The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by the Company or on behalf of the Company, except as required by law.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/178753