(NewsDirect)
Net loss of $4.4
million, Free Cash Flow to Equity
1
of $0.6
million
EBITDA
1
of $1.6 million, ending
quarter cash & restricted cash of $48.2 million
Quarterly dividend of
Cdn$0.03 per share declared, representing 12.4%
yield
2
Amerigo Resources Ltd. (TSX: ARG; OTCQX: ARREF)
(“Amerigo” or the “Company”) is pleased to announce financial
results for the three months ended September 30, 2022 (“Q3-2022”).
Dollar amounts in this news release are in U.S. dollars unless
indicated otherwise.
Quarterly
results included a net loss of $4.4 million, loss per share
(“LPS”) of $0.03 (Cdn$0.03) and EBITDA of $1.6 million. Following
year-to-date return of capital to shareholders of $24.3 million and
debt repayments of $3.5 million, cash and restricted cash on September
30, 2022 were $48.2 million, compared to starting 2022 cash and
restricted cash of $64.0 million.
Amerigo’s quarterly financial results were impacted by $8.6
million in negative price settlement adjustments to prior quarter
copper sales.
“We are pleased to
report another strong operational quarter where we continued to meet
production and cost objectives. We also successfully negotiated a
three-year collective labour agreement that will lend further
visibility to our forward costs. However, Amerigo’s financial
results were negatively affected by copper prices that appeared to be
bottoming towards the end of the quarter,” said Aurora Davidson,
Amerigo’s President and CEO. “Despite the lower copper prices,
Amerigo generated positive free cash flow to equity
1
. We
remain committed to our policy of returning capital to shareholders
while we wait for global sentiment to stabilize and copper prices to
re-establish their positive historical correlation with inflation,”
she added.
On October 31, 2022,
Amerigo’s Board of Directors declared a quarterly dividend of
Cdn$0.03 per share, payable on December 20, 2022, to shareholders of
record as of November 30, 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 September 30, 2022, share closing price of Cdn$0.97, this
represents an annual dividend yield 12.4%
2
.
This news release should be read in
conjunction with Amerigo’s interim consolidated financial statements
and Management’s Discussion and Analysis (“MD&A) for the three
and nine months ended September 30, 2022, available at the Company’s
website at
www.amerigoresources.com
and at
www.sedar.com
.
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|
MVC’s copper price |
3.50 |
4.23 |
|||
|
Revenue ($ |
30.9 |
48.1 |
|||
|
Net (loss) |
(4.4) |
8.4 |
|||
|
(LPS) EPS ($) |
(0.03) |
0.05 |
|||
|
(LPS) EPS |
(0.03) |
0.06 |
|||
|
EBITDA |
1.6 |
18.5 |
|||
|
Operating cash |
2.6 |
14.1 |
|||
|
FCFE |
0.6 |
5.9 |
|||
|
Cash ($ millions) |
41.8 |
59.8 |
|||
|
Restricted cash ($ |
6.4 |
4.2 |
|||
|
Borrowings ($ millions) |
27.6 |
30.4 |
|||
|
Share outstanding at end of period (millions) |
166.0 |
173.7 |
|||
Highlights and Significant Items
-
In Q3-2022,
market copper prices continued to decline, affecting Amerigo’s
financial performance through lower current quarterly revenue which is
marked-to-market at a lower provisional price (Q3-2022: $3.50 per
pound (“/lb”); Q3-2021: $4.23/lb)3 and through negative final
price settlement adjustments to prior-quarter production (Q3-2022:
$8.6 million in negative adjustments to Q2-2022 production; Q3-2021:
$2.4 million in negative adjustments to Q2-2021
production). -
As a result, Amerigo posted a net loss in Q3-2022
of $4.4 million (Q3-2021: net income of $8.4 million). LPS during
Q3-2022 was $0.03 (Cdn$0.03) (Q3-2021: EPS of $0.05
(Cdn$0.06)). -
Q3-2022 production was 16.0 million pounds of
copper (Q3-2021: 16.0 million pounds) including 8.6 million pounds
from fresh tailings (Q3-2021: 8.6 million pounds) and 7.4 million
pounds from Cauquenes (Q3-2021: 7.4 million pounds). -
Molybdenum production in Q3-2022 was 0.3 million pounds
(Q3-2021: 0.3 million pounds). -
Revenue during Q3-2022 was
$30.9 million (Q3-2021: $48.1 million), including copper tolling
revenue of $27.4 million (Q3-2021: $42.5 million) and molybdenum
revenue of $3.5 million (Q3-2021: $5.6 million). -
Copper
tolling revenue is calculated from MVC’s gross value of copper
produced during Q3-2022 of $56.8 million (Q3-2021: $72.0 million) and
negative fair value adjustments to settlement receivables of $8.8
million (Q3-2021: $2.9 million), less notional items including DET
royalties of $14.3 million (Q3-2021: $20.6 million), smelting and
refining of $5.9 million (Q3-2021: $5.5 million) and transportation of
$0.4 million (Q3-2021: $0.5 million). The Q3-2022 settlement
adjustments included $8.6 million in negative settlement adjustments
in respect of Q2-2022 production, which are final
adjustments. -
The Company generated operating cash flow before
changes in non-cash working capital1 of $2.6 million in Q3-2022
(Q3-2021: $14.1 million). Quarterly net operating cash flow used in
operating activities was $6.3 million (Q3-2021: cash generated of
$25.4 million). There was free cash flow to equity1 of $0.6 million in
Q3-2022 (Q3-2021: $5.9 million). -
Q3-2022 cash cost1 increased
19% to $1.93/lb (Q3-2021: $1.62/lb), driven mostly by a decrease of
$0.13/lb in molybdenum by-product credits from a lower molybdenum
price, an increase of $0.05/lb in grinding media and an increase of
$0.07/lb in other direct costs. -
Amerigo’s financial
performance is very sensitive to changes in copper prices. MVC’s
Q3-2022 provisional copper price was $3.50/lb3, and final prices for
July, August, and September sales will be the average London Metal
Exchange (“LME”) prices for October, November, and December,
respectively. A 10% increase or decrease from the $3.50/lb3
provisional price used on September 30, 2022 would result in a $5.7
million change in revenue in Q4-2022 in respect of Q3-2022
production. -
In Q3-2022, Amerigo returned $3.8 million to
shareholders through Amerigo’s regular quarterly dividend of
Cdn$0.03 per share. YTD-2022, Amerigo returned $24.3 million to
shareholders, with $12.0 million paid out in dividends and $12.3
million returned through the purchase of 9.4 million common shares for
cancellation through a Normal Course Issuer Bid. -
On September
30, 2022, the Company held cash and cash equivalents of $41.8 million
(December 31, 2021: $59.8 million), restricted cash of $6.4 million
(December 31, 2021: $4.2 million) and had working capital of $6.9
million (December 31, 2021: $24.6 million).
Investor Conference Call on November 3,
2022
Amerigo’s quarterly
investor conference call will take place on Thursday, November 3, 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 99826991
.
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; OTCQX: ARREF.
Contact Information:
Aurora Davidson Graham Farrell
President and CEO Investor
Relations
(604)697-6207 (416)842-9003
[email protected]
[email protected]
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|
Cash and cash equivalents |
41,813 |
59,792 |
|
Restricted cash |
6,384 |
4,221 |
|
Property plant and equipment |
171,534 |
178,083 |
|
Other assets |
20,797 |
27,249 |
|
Total assets |
|
|
|
Total |
116,202 |
130,552 |
|
Shareholders’ equity |
124,326 |
138,793 |
|
Total |
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|
|
|
|
|
|
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|
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|
Revenue |
30,858 |
48,132 |
|
Tolling and production costs |
(34,414) |
(33,940) |
|
Other expenses |
(1,587) |
(1,546) |
|
Finance expense |
(204) |
(1,102) |
|
Income tax recovery (expense) |
905 |
(3,124) |
|
|
|
|
|
Other comprehensive income |
2,353 |
55 |
|
Comprehensive |
(2,089) |
8,475 |
|
|
|
|
|
(Loss) earnings per share – |
(0.03) |
0.05 |
|
|
||
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from |
2,617 |
14,067 |
|
Changes in |
(8,926) |
11,315 |
|
Net cash (used |
(6,309) |
25,382 |
|
Net cash used in |
(1,814) |
(6,022) |
|
Net cash used in financing |
(4,003) |
(2,156) |
|
Net (decrease) increase in cash |
(12,126) |
17,204 |
|
Effect of foreign exchange rates on |
919 |
(1,168) |
|
Cash and cash |
53,020 |
48,909 |
|
Cash and cash equivalents, end |
|
|
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 profit or
loss.
|
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|
Gross (loss) profit |
(3,556) |
14,192 |
|
Add |
||
|
Depreciation and |
5,125 |
4,325 |
|
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|
(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.
|
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Net cash (used in) from operating |
(6,309) |
25,382 |
|
Add |
||
|
Changes in non-cash working |
8,926 |
(11,315) |
|
|
|
|
(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.
|
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Operating cash flow before changes in |
2,617 |
14,067 |
|
Deduct: |
||
|
Cash |
(1,814) |
(6,022) |
|
Repayment of borrowings net of new debt issued |
– |
(1,904) |
|
Lease repayments |
(218) |
(252) |
|
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|
Add: |
||
|
Repayment of borrowings net of new |
– |
1,904 |
|
Lease |
218 |
252 |
|
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|
(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.
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|
Tolling and production costs |
34,414 |
33,940 |
|||
|
Add (deduct): |
|||||
|
Smelting and refining charges |
5,926 |
5,499 |
|||
|
Transportation costs |
410 |
520 |
|||
|
Inventory adjustments |
(614) |
(3,101) |
|||
|
By-product credits |
(3,492) |
(5,611) |
|||
|
DET |
(691) |
(1,115) |
|||
|
Depreciation and amortization |
(5,125) |
(4,325) |
|||
|
30,828 |
25,807 |
||||
|
Copper tolled (M lbs) |
16.00 |
15.99 |
|||
|
Cash cost |
1.93 |
1.62 |
|||
2
Dividend yield
The disclosed annual yield of 12.4% is
based on four quarterly dividends of Cdn$0.03 per share each, divided
over Amerigo’s September 30, 2022 share price of Cdn$0.97.
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.
Q2-2022 copper deliveries were
marked-to-market at June 30, 2022 at $4.10/lb and were settled in
Q3-2022 as follows:
• April 2022
sales settled at the July 2022 LME average price of $3.41/lb
• May 2022 sales settled at the August
2022 LME average price of $3.61/lb
• June 2022 sales settled at the September 2022 LME average
price of $3.51/lb
Q3-2022 copper
deliveries were marked-to-market at September 30, 2022 at $3.50/lb and
will be settled at the LME average prices for October, November and
December 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; -
the
sufficiency of MVC’s water reserves to maintain projected Cauquenes
tonnage processing for a period of at least 18 months; -
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 redeploy
other tools of our capital return strategy; -
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; -
potential impact of production and
transportation disruptions; -
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, including, but not limited to, our
assessment of strong market fundamentals supporting copper
prices.
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 deposit; 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 the Company’s or MVC’s staff
will not contract COVID-19 or that the Company’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 the Company 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 several 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, molybdenum 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; -
engineering and construction timetables and
capital costs for our expansion projects; -
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 continuing to trend towards 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 the Company`s Annual Information Form. The
forward-looking statements contained herein speak only as of the date
of this 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
Graham
Farrell
+1 416-842-9003
Company
Website
http://www.amerigoresources.com/
Copyright (c) 2022 TheNewswire – All rights reserved.
Featured image: DepositPhotos © ttstudio
