Amerigo Announces Q2-2022 Results & Quarterly Dividend

Amerigo Resources Ltd

(NewsDirect)


Net loss of $5.1
million driven by prior quarter settlement adjustments & annual
maintenance shutdown


EBITDA



1


of $6.7 million, ending
quarter cash & restricted cash of $57.2 million


Quarterly dividend of
Cdn$0.03 per share declared, representing 9.68%
yield



2



Company reaffirms return of shareholder capital
policy


Amerigo Resources Ltd. (TSX: ARG; OTC: ARREF)

(“Amerigo” or the “Company”) is pleased to announce
financial results for the three months ended June 30, 2022
(“Q2-2022”).

Dollar amounts in this news release are in U.S.
dollars unless indicated otherwise.

Amerigo’s quarterly financial results were
impacted by reduced copper production during the annual scheduled
maintenance shutdown of Minera Valle Central (“MVC”), the
Company’s 100% owned operation located near Rancagua, Chile, and
$5.1 million in negative price settlement adjustments to prior quarter
copper sales.

Quarterly results included a net loss of $5.1 million, loss per
share (“LPS”) of $0.03 (Cdn$0.04) and EBITDA[1]

of $6.7
million. Following year-to-date return of capital to shareholders of
$20.5 million and debt repayments of $3.5 million, cash and restricted
cash on June 30, 2022 were $57.2 million, compared to starting 2022
cash and restricted cash of $64.0 million.

“We are pleased to report a strong
operational quarter where we continued to meet production and cost
objectives, which incorporated the annual maintenance shutdown.
However, Amerigo’s financial results were negatively affected by a
substantial decline in copper prices which translated to a quarterly
loss of $5.1 million”, said Aurora Davidson, Amerigo’s President
and CEO. “Copper price volatility is not new or uncommon, but
Amerigo is now well-positioned to weather a period of lower prices.
Backed by a strong balance sheet, we remain committed to our policy of
returning capital to shareholders”, she added.

On August 2, 2022,
Amerigo’s Board of Directors declared a quarterly dividend of
Cdn$0.03 per share, payable on September 20, 2022, to shareholders of
record as of August 31, 2022. Amerigo designates the entire amount of
this taxable dividend to be an “eligible dividend” for purposes of
the

Income Tax Act

(Canada), as amended from time to time.
Based on the June 30, 2022, share closing price of Cdn$1.24, this
would represent an annual dividend yield 9.68%

2

.

Amerigo’s Board of
Directors will seek Toronto Stock Exchange (“TSX”) approval to
commence a Normal Course Issuer Bid (“NCIB”) after December 2,
2022, once the current 12-month NCIB period expires, as the Company
has already purchased the maximum number of securities permitted by
the TSX in a 12-month period.

This news release should be read in conjunction
with Amerigo’s interim consolidated financial statements and
Management’s Discussion and Analysis (“MD&A) for the three and
six months ended June 30, 2022, available at the Company’s website
at

www.amerigoresources.com

and at

www.sedar.com.


30-Jun-22

31-Dec-21

Q2-2022

Q2-2021

MVC’s copper price
($/lb)

3

4.10

4.37

Revenue ($
millions)

33.6

50.5

Net (loss)
income ($ millions)

(5.1)

11.6

(LPS) EPS ($)

(0.03)

0.06

(LPS) EPS
(Cdn)

(0.04)

0.08

EBITDA

1

($ millions)

6.7

23.4

Operating cash
flow before changes in non-cash working capital

1

($
millions)

(4.0)

17.1

FCFE

1

($ millions)

(10.7)

5.7

Cash ($ millions)

53.0

59.8

Restricted cash ($
millions)

4.2

4.2

Borrowings ($ millions)

27.0

30.4

Share
outstanding at end of period (millions)

166.0

173.7


Highlights and Significant Items



  • In
    Q2-2022, market copper prices declined significantly, affecting
    Amerigo’s financial performance twofold: through lower current
    quarterly revenue which is marked-to-market at a lower provisional
    price (Q2-2022: $4.10 per pound (“/lb”)

    3

    ; Q2-2021:
    $4.37/lb)

    3

    and through negative final price settlement
    adjustments to prior-quarter production (Q2-2022: $5.1 million in
    negative final price settlement adjustments to Q1-2022 production;
    Q2-2021: $5.3 million in positive final price settlement adjustments
    to Q1-2021 production).
  • Amerigo posted
    a net loss in Q2-2022 of $5.1 million (Q2-2021: net income of $11.6
    million). LPS during Q2-2022 was $0.03 (Cdn$0.04) (Q2-2021: earnings
    per share (“EPS”) of $0.06 (Cdn$0.08)).
  • Q2-2022 production was 14.9 million pounds
    (“M lbs”) of copper, in line with Q2-2021 production of 15.0 M lbs
    despite MVC operating for 8 fewer days in Q2-2022 due to its annual
    maintenance shutdown. Production in Q2-2022 was positively impacted by
    higher tonnage, grade and recoveries from fresh tailings and higher
    grade and recoveries from Cauquenes.
  • Molybdenum production in Q2-2022 was 0.2 million pounds
    (Q2-2021: 0.3 million pounds) due to lower molybdenum content in fresh
    tailings.
  • Revenue during Q2-2022
    was $33.6 million (Q2-2021: $50.5 million), including copper tolling
    revenue of $31.4 million (Q2-2021: $45.7 million) and molybdenum
    revenue of $2.2 million (Q2-2021: $4.8 million).
  • Copper tolling revenue is calculated from
    MVC’s gross value of copper produced during Q2-2022 of $63.7 million
    (Q2-2021: $66.6 million) and negative fair value adjustments to
    settlement receivables of $7.9 million (Q2-2021: positive adjustments
    of $4.8 million), less notional items including DET royalties of $18.3
    million (Q2-2021: $20.2 million), smelting and refining of $5.8
    million (Q2-2021: $4.9 million) and transportation of $0.4 million
    (Q2-2021: $0.5 million). The Q2-2022 fair value adjustments included
    $5.1 million in negative price settlement adjustments in respect of
    Q1-2022 production, which are final adjustments (Q2-2021: $5.3 million
    of positive final price settlement adjustments in respect of Q1-2021
    production).
  • The Company
    used operating cash flow before changes in non-cash working
    capital

    1

    of $4.0 million in Q2-2022 (Q2-2021: cash
    generated of $17.1 million). Quarterly net operating cash flow was
    $2.7 million (Q2-2021: $21.9 million). There was negative free cash
    flow

    1

    to equity of $10.7 million in Q2-2022 (Q2-2021:
    positive cash flow of $5.7 million).
  • Q2-2022 cash cost

    1

    was $2.01/lb (Q2-2021:
    $1.81/lb), driven by a decrease of $0.17/lb in molybdenum by-product
    credits from lower molybdenum production and an increase of $0.06/lb
    in smelter/refinery charges. All other cost combined decreased by
    $0.03/lb.
  • Amerigo’s financial
    performance is very sensitive to changes in copper prices. At June 30,
    2022, the Company’s provisional copper price was
    $4.10/lb

    3

    , and final prices for April, May and June 2022
    sales will be the average London Metal Exchange (“LME”) prices for
    July, August and September 2022, respectively. A 10% increase or
    decrease from the $4.10/lb

    3

    provisional price used on June
    30, 2022 would result in a $6.1 million change in revenue in Q3-2022
    in respect of Q2-2022 production.
  • In
    Q2-2022, Amerigo returned $13.0 million to shareholders: $4.1 million
    was paid on June 20, 2022 through Amerigo’s regular quarterly
    dividend of Cdn$0.03 per share, and $8.9 million was returned through
    the purchase of 6.9 million common shares for cancellation through
    Amerigo’s recently completed Normal Course Issuer Bid. Year-to-date,
    Amerigo returned $20.5 million to shareholders.
  • In Q2-2022, the Company made scheduled debt
    payments of $3.5 million (Q2-2021: net debt payments of $10.3 million)
    and paid $3.0 million for plant and equipment (Q2-2021: $0.8 million).
  • On June 30, 2022, the Company held cash
    and cash equivalents of $53.0 million (December 31, 2021: $59.8
    million), restricted cash of $4.2 million (December 31, 2021: $4.2
    million) and had working capital of $10.9 million (December 31, 2021:
    $24.6 million).


Investor Conference Call on August 4, 2022

Amerigo’s quarterly
investor conference call will take place on Thursday, August 4, 2022
at 11:00 am Pacific Daylight Time/2:00 pm Eastern Daylight Time. To
join the call, please dial

1-888-664-6392

(Toll-Free North
America) and enter

confirmation number 81494727.


Upcoming Investor Conferences Participation

Amerigo will be
participating in the

Sidoti Small Cap Virtual Conference

on
September 21 and 22, 2022 and the

121 Global Online Tech Metals

conference on October 25 and 26, 2022. CEO Aurora Davidson will be
presenting at both conferences and will be available for one-on-one
meetings throughout each event.


About Amerigo and Minera Valle Central
(“MVC”)

Amerigo Resources Ltd. is an innovative copper
producer with a long-term relationship with Corporación Nacional del
Cobre de Chile (“Codelco”), the world’s largest copper producer.
Amerigo produces copper concentrate and molybdenum concentrate as a
by-product at the MVC operation in Chile by processing fresh and
historic tailings from Codelco’s El Teniente mine, the world’s
largest underground copper mine. Tel: (604) 681-2802; Web:

www.amerigoresources.com

;
ARG:TSX; OTC: ARREF.


Summary Consolidated Statements of
Financial Position


June 30,


2022


$ thousands


December
31,


2021


$ thousands

Cash and cash equivalents 53,020 59,792
Restricted
cash
4,198 4,221
Property plant and equipment 174,076 178,083
Other
assets
16,970 27,249
Total assets
248,264

269,345
Total liabilities 118,327 130,552
Shareholders’ equity

129,937

138,793

Total
liabilities and shareholders’ equity


248,264


269,345


Summary Consolidated Statements of
(Loss) Income and Comprehensive (Loss) Income


Three months ended June
30,


2022


$ thousands


2021


$ thousands

Revenue 33,584 50,503
Tolling and production costs (31,968) (31,376)
Other
expenses
(3,089) (1,060)
Finance expense (267) (2,136)
Income tax
expense
(3,331) (4,345)


Net (loss)
income


(5,071)

11,586
Other comprehensive
income (loss)
728 (69)

Comprehensive (loss) income

(4,343) 11,517
(Loss) earnings
per share – basic & diluted
(0.03) 0.06

Summary
Consolidated Statements of Cash Flows


Three months ended June 30,


2022


$
thousands


2021


$ thousands

Cash flows (used in) from operating
activities
(3,952) 17,067

Changes in non-cash working capital

6,644 4,835
Net cash from operating
activities
2,692 21,902
Net cash used in investing
activities
(3,010) (839)
Net cash used
in financing activities
(16,578) (10,574)
Net (decrease)
increase in cash
(16,896) 10,489
Effect of foreign exchange rates on cash (1,179) (223)
Cash and cash
equivalents, beginning of period
71,095 38,643
Cash and cash equivalents, end of period
53,020

48,909


1 Non-IFRS Measures

This news release
includes five non-IFRS measures: (i) EBITDA, (ii) operating cash flow
before changes in non-cash working capital, (iii) free cash flow to
equity (“FCFE”), (iv) free cash flow (“FCF”) and (v) cash
cost.

These
non-IFRS performance measures are included in this news release
because they provide key performance measures used by management to
monitor operating performance, assess corporate performance, and to
plan and assess the overall effectiveness and efficiency of
Amerigo’s operations. These performance measures are not
standardized financial measures under IFRS and, therefore, amounts
presented may not be comparable to similar financial measures
disclosed by other companies. These performance measures should not be
considered in isolation as a substitute for measures of performance in
accordance with IFRS.

(i) EBITDA
refers to earnings before interest, taxes, depreciation, and
administration and is calculated by adding back depreciation expense
to the Company’s gross margin.


(Expressed in
thousands)


Q2-2022


Q2-2021


$

$
Gross Profit 1,616 19,127

Add

Depreciation and amortization

5,059 4,321

EBITDA

6,675

23,448

(ii) Operating cash flow before changes in
non-cash working capital is calculated by adding back the decrease or
subtracting the increase in changes in non-cash working capital to or
from cash provided by operating activities.


(Expressed
in thousands)

Q2-2022

Q2-2021

$

$
Net cash from operating
activities
2,692 21,902
Add
(deduct):

Changes in non-cash working
capital

(6,644) (4,835)


Operating
cash flow before changes in non-cash working capital


(3,952)

17,067

(iii) Free cash flow to equity
(“FCFE”) refers to operating cash flow before changes in non-cash
working capital less capital expenditures plus new debt issued less
debt and lease repayments. FCFE represents the amount of cash
generated by the Company in a reporting period that can be used to pay
for:

a) potential distributions to the Company’s shareholders, and

b) any additional taxes triggered by the repatriation of funds
from Chile to Canada to fund these distributions.

Free cash flow
(“FCF”) refers to FCFE plus repayments of borrowings and lease
repayments.


(Expressed
in thousands)

Q2-2022

Q1-2022

$

$
Operating cash flow before changes in
non-cash working capital
(3,952) 17,067
Deduct:

Cash used to purchase plant and equipment

(3,010) (839)

Repayment of borrowings
net of new debt issued

(3,500) (10,233)

Lease repayments

(195) (341)

Free cash
flow to equity

(10,657)

5,654
Add:

Repayment of borrowings net of new debt issued

3,500 10,233

Lease repayments

195 341


Free cash
flow


(6,962)

16,228

(iv) Cash cost is a performance measure
commonly used in the mining industry that is not defined under IFRS.
Cash cost is the aggregate of smelting and refining charges,
tolling/production costs net of inventory adjustments and
administration costs, net of by-product credits. Cash cost per pound
produced is based on pounds of copper produced and is calculated by
dividing cash cost over the number of pounds of copper
produced.


(Expressed in
thousands)

Q2-2022

Q1-2022

$

$
Tolling and
production costs
31,968.00 31,376
Add
(deduct):

Smelting and refining
charges

5,791.00 4,944

Transportaton costs

403.00 524

Inventory adjustments

(310) 1

By-product
credits

-$2,241.00 (4,762)

DET royalties-molybdenum

-$518.00 (591)

Depreciation and amortization

-$5,059.00 (4,321)
30,034.00 27,171
Copper tolled
(M lbs)
14.92 14.99
Cash costs ($/lb) 2.01 1.81


2 Dividend yield

The disclosed annual yield of 9.68% is based on
four quarterly dividends of Cdn$0.03 per share each, divided over
Amerigo’s June 30, 2022 share price of Cdn$1.24.


3 MVC’s copper
price

MVC’s
copper price is the average notional copper price for the period,
before smelting and refining, DET notional copper royalties,
transportation costs and excluding settlement adjustments to prior
period sales.

MVC’s pricing terms are based on the average LME copper price
for the third month following delivery of copper concentrates produced
under the tolling agreement with DET (“M+3”). This means that when
final copper prices are not yet known, they are provisionally
marked-to-market at the end of each month based on the progression of
the LME published average monthly M and M+3 prices. Provisional prices
are adjusted monthly using this consistent methodology, until they are
settled.

Q1-2022
copper deliveries were marked-to-market at March 31, 2022 at $4.64/lb
and were settled in Q2-2022 as follows:

  • January 2022 sales settled at the April
    2022 LME average price of $4.62/lb
  • February 2022 sales settled
    at the May 2022 LME average price of $4.25/lb
  • March 2022 sales
    settled at the June 2022 LME average price of $4.10/lb

Q2-2022 copper
deliveries were marked-to-market at June 30, 2022 at $4.10/lb and will
be settled at the LME average prices for July, August and September
2022.


Cautionary Statement on Forward-Looking Information

This news
release contains certain forward-looking information and statements as
defined in applicable securities laws (collectively referred to as
“forward-looking statements”). These statements relate to
future events or the Company’s future performance. All statements
other than statements of historical fact are forward-looking
statements. The use of any of the words “anticipate”,
“plan”, “continue”, “estimate”,
“expect”, “may”, “will”, “project”,
“predict”, “potential”, “should”,
“believe” and similar expressions is intended to identify
forward-looking statements. These forward-looking statements include
but are not limited to, statements concerning:

  • forecasted production
    and operating costs;
  • our strategies and
    objectives;
  • our estimates of the availability and quantity of
    tailings, and the quality of our mine plan estimates;
  • prices
    and price volatility for copper, molybdenum, and other commodities and
    of materials we use in our operations;
  • the demand for and
    supply of copper, molybdenum, and other commodities and materials that
    we produce, sell and use;
  • sensitivity of our financial results
    and share price to changes in commodity prices;
  • our financial
    resources and financial condition and our expected ability to meet our
    obligations for the next 12 months;
  • interest and other
    expenses;
  • domestic and foreign laws affecting our
    operations;
  • our tax position and the tax rates applicable to
    us;
  • our ability to comply with our loan covenants;
  • the
    production capacity of our operations, our planned production levels
    and future production;
  • hazards inherent in the mining industry
    causing personal injury or loss of life, severe damage to or
    destruction of property and equipment, pollution or environmental
    damage, claims by third parties and suspension of
    operations
  • estimates of asset retirement obligations and other
    costs related to environmental protection;
  • our future capital
    and production costs, including the costs and potential impact of
    complying with existing and proposed environmental laws and
    regulations in the operation and closure of our
    operations;
  • repudiation, nullification, modification or
    renegotiation of contracts;
  • our financial and operating
    objectives;
  • our environmental, health and safety
    initiatives;
  • the outcome of legal proceedings and other
    disputes in which we may be involved;
  • the outcome of
    negotiations concerning metal sales, treatment charges and
    royalties;
  • disruptions to the Company’s information
    technology systems, including those related to
    cybersecurity;
  • our dividend policy; and
  • general
    business and economic conditions.

These forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause actual results
or events to differ materially from those anticipated in such
statements. Inherent in forward-looking statements are risks and
uncertainties beyond our ability to predict or control, including
risks that may affect our operating or capital plans; risks generally
encountered in the permitting and development of mineral projects such
as unusual or unexpected geological formations, negotiations with
government and other third parties, unanticipated metallurgical
difficulties, delays associated with permits, approvals and permit
appeals, ground control problems, adverse weather conditions, process
upsets and equipment malfunctions; risks associated with labour
disturbances and availability of skilled labour and management; risks
related to the potential impact of global or national health concerns,
including COVID-19, and the inability of employees to access
sufficient healthcare; government or regulatory actions or inactions,
fluctuations in the market prices of our principal commodities, which
are cyclical and subject to substantial price fluctuations; risks
created through competition for mining projects and properties; risks
associated with lack of access to markets; risks associated with
availability of and our ability to obtain both tailings from
Codelco’s Division El Teniente’s current production and historic
tailings from tailings deposits; risks with respect to the ability of
the Company to draw down funds from bank facilities and lines of
credit, and the availability of and ability of the Company to obtain
adequate funding on reasonable terms for expansions and acquisitions;
mine plan estimates; risks posed by fluctuations in exchange rates and
interest rates, as well as general economic conditions; risks
associated with environmental compliance and changes in environmental
legislation and regulation; risks associated with our dependence on
third parties for the provision of critical services; risks associated
with non-performance by contractual counterparties; risks associated
with supply chain disruptions; title risks; social and political risks
associated with operations in foreign countries; risks of changes in
laws affecting our operations or their interpretation, including
foreign exchange controls; and risks associated with tax reassessments
and legal proceedings. Notwithstanding the efforts of the Company and
MVC, there can be no guarantee that Amerigo’s or MVC’s staff will
not contract COVID-19 or that Amerigo’s and MVC’s measures to
protect staff from COVID-19 will be effective. Many of these risks and
uncertainties apply not only to the Company and its operations, but
also to Codelco and its operations. Codelco’s ongoing mining
operations provide a significant portion of the materials MVC
processes and its resulting metals production, therefore these risks
and uncertainties may also affect their operations and in turn have a
material effect on the Company.

Actual results and developments are likely to
differ, and may differ materially, from those expressed or implied by
the forward-looking statements contained in this news release. Such
statements are based on a number of assumptions which may prove to be
incorrect, including, but not limited to, assumptions about:

  • general business and
    economic conditions;
  • interest and currency exchange
    rates;
  • changes in commodity and power prices;
  • acts of
    foreign governments and the outcome of legal proceedings;
  • the
    supply and demand for, deliveries of, and the level and volatility of
    prices of copper and other commodities and products used in our
    operations;
  • the ongoing supply of material for processing from
    Codelco’s current mining operations;
  • the grade and projected
    recoveries of tailings processed by MVC;
  • the ability of the
    Company to profitably extract and process material from the Cauquenes
    tailings deposit;
  • the timing of the receipt of and retention
    of permits and other regulatory and governmental
    approvals;
  • our costs of production and our production and
    productivity levels, as well as those of our
    competitors;
  • changes in credit market conditions and
    conditions in financial markets generally;
  • our ability to
    procure equipment and operating supplies in sufficient quantities and
    on a timely basis;
  • the availability of qualified employees and
    contractors for our operations;
  • our ability to attract and
    retain skilled staff;
  • the satisfactory negotiation of
    collective agreements with unionized employees;
  • the impact of
    changes in foreign exchange rates and capital repatriation on our
    costs and results;
  • costs of closure of various
    operations;
  • market competition;
  • tax benefits and tax
    rates;
  • the outcome of our copper concentrate sales and
    treatment and refining charge negotiations;
  • the resolution of
    environmental and other proceedings or disputes;
  • the future
    supply of reasonably priced power;
  • rainfall in the vicinity of
    MVC returning to normal levels;
  • average recoveries for fresh
    tailings and Cauquenes tailings;
  • our ability to obtain, comply
    with and renew permits and licenses in a timely manner;
    and
  • our ongoing relations with our employees and entities with
    which we do business.

Future production levels and cost estimates assume there are no
adverse mining or other events which significantly affect budgeted
production levels.

Although the Company believes that these assumptions were
reasonable when made, because these assumptions are inherently subject
to significant uncertainties and contingencies which are difficult or
impossible to predict and are beyond the Company’s control, the
Company cannot assure that it will achieve or accomplish the
expectations, beliefs or projections described in the forward-looking
statements.

We
caution you that the foregoing list of important factors and
assumptions is not exhaustive. Other events or circumstances could
cause our actual results to differ materially from those estimated or
projected and expressed in, or implied by, our forward-looking
statements. You should also carefully consider the matters discussed
under

Risk Factors

in Amerigo’s Annual Information Form. The
forward-looking statements contained herein speak only as of the date
of the news release and except as required by law, we undertake no
obligation to update publicly or otherwise revise any forward-looking
statements or the foregoing list of factors, whether as a result of
new information or future events or otherwise.


Contact
Details

Aurora Davidson, President and CEO

+1
604-697-6207


[email protected]

Graham
Farrell

+1 416-842-9003


[email protected]


Company
Website


http://www.amerigoresources.com/

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