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Amerigo Announces Q3-2023 Results & Quarterly Dividend

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Amerigo Announces Q3-2023 Results & Quarterly Dividend

 

 

 

 

 

Net loss of $5.8 million driven by 31% lower copper production

 

EBITDAof $3.2 million, ending quarter cash & restricted cash of $19.4 million

 

Quarterly dividend of Cdn$0.03 per share declared, representing a 9.4% yield2

 

Current production outperforming Q4-2022, Capital Return Strategy remains in place

 

Amerigo Resources Ltd. (TSX: ARG) (OTCQX: ARREF)  announces financial results for the three months ended September 30, 2023 (“Q3-2023”). Dollar amounts in this news release are in U.S. dollars unless indicated otherwise.

 

Q3-2023 results included a net loss of $5.8 million, loss per share of $0.04 (Cdn$0.05) and EBITDA1 of $3.2 million. Lower copper production from Minera Valle Central, the Company’s 100% owned operation near Rancagua, Chile, impacted these results. The negative impact from lower production was mitigated by lower settlement adjustments to prior quarter sales, copper royalties, and tolling and production costs quarter-on-quarter. Financial performance was also impacted by an increase of $1.4 million in unrealized foreign exchange loss and a $1.1 million environmental compliance plan.

 

“This was a very challenging operational quarter for Amerigo,” said Aurora Davidson, Amerigo’s President and CEO. “However, since the end of September, we are again outperforming our production targets, which is a testament to the excellence of our operational teams. We have put this production interruption behind us and are looking ahead with even more confidence in MVC’s ability to produce copper profitably and sustainably. Despite the past two challenging quarters, I am pleased to announce the Board of Directors has declared the Company’s ninth consecutive dividend. Given the combination of recent operational impacts and current economic headwinds weighing on copper prices, the Board is examining the temporary modification of the quarterly and performance dividend components of our Capital Return Strategy. While we wait for copper prices to improve, we have maintained our pause on buying back shares in the marketplace,” she added.

 

After year-to-date capital returns to shareholders of $13.6 million, Capex payments of $14.4 million, and debt and lease repayments of $5.4 million, cash and restricted cash on September 30, 2023, were $19.4 million, compared to the beginning of 2023 cash and restricted cash of $42.0 million.

 

On October 30, 2023, Amerigo’s Board of Directors declared its ninth consecutive quarterly dividend. The dividend will be in the amount of Cdn$0.03 per share, payable on December 20, 2023, to shareholders of record as of November 30, 20233. 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 Amerigo’s September 29, 2023, share closing price of Cdn$1.27, this represents an annual dividend yield of 9.4%2.

 

This news release should be read with Amerigo’s interim consolidated financial statements and Management’s Discussion and Analysis for Q3-2023, available on the Company’s website at www.amerigoresources.com and www.sedarplus.ca.

 

 

           
    30-Sep-23 31-Dec-22 Q3-2023   Q3-2022  
MVC’s copper price ($/lb)4       3.76   3.50  
Revenue ($ millions)       30.3   30.9  
Net loss ($ millions)       (5.8)   (4.4)  
LPS ($)       (0.04)   (0.03)  
LPS (Cdn)       (0.05)   (0.03)  
EBITDA1($ millions)       3.2   1.6  
Operating cash flow before changes in non-cash working capital1($ millions)   2.6   2.6  
FCFE1($ millions)       (2.6)   0.6  
Cash ($ millions)   13.1 37.8    
Restricted cash ($ millions)   6.3 4.2    
Borrowings ($ millions)   20.3 23.7    
Shares outstanding at end of period (millions)   164.8 166.0    
           

 

Highlights and Significant Items

  • Amerigo’s Q3-2023 financial performance was impacted by 31% lower copper production compared to the quarter ended September 30, 2022 due to severe rain in central Chile, which temporarily affected MVC’s operations in two separate events. MVC fully resolved these disruptions and resumed normal operations and production levels on September 21, 2023.
  • Despite 31% lower copper production, Q3-2023 revenue of $30.3 million was only 2% lower than Q3-2022 revenue of $30.9 million due to a higher average copper price of $3.76 per pound (Q3-2022: $3.50/lb), a reduction of $8.4 million in negative settlement adjustment to prior quarter sales, $1.6 million in lower notional items including copper royalties to DET, and a $1.1 million increase in molybdenum revenue.
  • Tolling and production costs were $32.4 million (Q3-2022: $34.4 million) due to lower copper production.
  • Net loss during Q3-2023 was $5.8 million, compared to a net loss of $4.4 million in Q3-2022, primarily due to an increase of $1.4 million in unrealized foreign exchange loss and $1.1 million spent on environmental compliance plan costs which could not be capitalized under IFRS.
  • LPS during Q3-2023 was $0.04 (Cdn$0.05) (Q3-2022: $0.03 (Cdn$0.03)).
  • Q3-2023 copper production was 11.1 million pounds (“M lbs”) (Q3-2022: 16.0 M lbs), including 8.2 M lbs from fresh tailings (Q3-2022: 8.6 M lbs) and 2.9 M lbs from historic tailings (Q3-2022: 7.4 M lbs).
  • Molybdenum production during Q3-2023 was 0.2 M lbs (Q3-2022: 0.3 M lbs). MVC’s molybdenum price increased to $23.31/lb (Q3-2022: $15.39/lb), resulting in a Q3-2023 molybdenum revenue of $4.6 million (Q3-2022: $3.5 million).
  • Copper tolling revenue is calculated from the gross value of copper produced in Q3-2023 of $41.6 million (Q3-2022: $56.8 million) and negative fair value adjustments to settlement receivables of $0.4 million (Q3-2022: $8.8 million), less notional items including DET royalties of $10.6 million (Q3-2022: $14.3 million), smelting and refining of $4.5 million (Q3-2022: $5.9 million) and transportation of $0.3 million (Q3-2022: $0.4 million).
  • In Q3-2023, the Company generated cash flow before changes in non-cash working capital1 of $2.6 million (Q3-2022: $2.6 million), used net operating cash of $7.5 million (Q3-2022: $4.1 million) and had negative free cash flow to equity1 (“FCFE”) of $2.6 million (Q3-2022: positive FCFE1 of $0.6 million).
  • Q3-2023 cash cost1 was $2.44/lb (Q3-2022: $1.93/lb), impacted by lower production, which resulted in increases of $0.44/lb in other direct costs, $0.21/lb in power costs and $0.04/lb in administration. Due to prevailing terms, smelting and refining costs were $0.03/lb higher. The cost increases were mitigated by stronger molybdenum by-product credits of $0.19/lb from higher prices.
  • Amerigo’s financial performance is sensitive to changes in copper prices. MVC’s Q3-2023 provisional copper price was $3.76/lb. The final prices for July, August, and September 2023 sales will be the average London Metal Exchange (“LME”) prices for October, November, and December 2023, respectively. A 10% increase or decrease from the $3.76/lb provisional price would result in a $4.1 million change in revenue in Q4-2023 regarding Q3-2023 production.
  • In Q3-2023, Amerigo returned $3.7 million to shareholders (Q3-2022: $3.8 million) through Amerigo’s quarterly dividend of Cdn$0.03 per share. YTD-2023 capital returns were $13.6 million: $11.0 million paid in quarterly dividends and $2.6 million returned through purchasing 2.3 million common shares for cancellation through a Normal Course Issuer Bid.
  • On September 30, 2023, the Company held cash and cash equivalents of $13.1 million (December 31, 2022: $37.8 million), restricted cash of $6.3 million (December 31, 2022: $4.2 million), had a working capital deficiency of $12.7 million (December 31, 2022: working capital of $10.0 million) and had not used funds from its $15.0 million working capital line of credit.

 

About Amerigo and Minera Valle Central

 

Amerigo Resources Ltd. is an innovative copper producer with a long-term relationship with Corporación Nacional del Cobre de Chile, 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.

 

 

 

Summary Consolidated Statements of Financial Position  
  September 30,   December 31,    
  2023   2022    
  $ thousands   $ thousands    
Cash and cash equivalents 13,131   37,821    
Restricted cash 6,305   4,215    
Property plant and equipment 159,831   158,591    
Other assets 20,054   30,552    
Total assets 199,321   231,179    
Total liabilities 93,678   112,476    
Shareholders’ equity 105,643   118,703    
Total liabilities and shareholders’ equity 199,321   231,179    
       
Summary Consolidated Statements of Loss and Comprehensive Loss  
  Three months ended September 30,  
  2023   2022    
  $ thousands   $ thousands    
Revenue 30,329   30,858    
Tolling and production costs (32,353)   (34,414)    
Other expenses (4,250)   (1,587)    
Finance expense (1,043)   (204)    
Income tax recovery 1,524   905    
Net loss (5,793)   (4,442)    
Other comprehensive income 1,169   2,353    
Comprehensive loss (4,624)   (2,089)    
       
Loss per share – basic & diluted (0.04)   (0.03)    
       
Summary Consolidated Statements of Cash Flows  
  Three months ended September 30,  
  2023   2022    
  $ thousands   $ thousands    
Cash flow from operating activities 2,617   2,617    
Changes in non-cash working capital (10,072)   (6,741)    
Net cash used in operating activities (7,455)   (4,124)    
Net cash used in investing activities (5,203)   (1,814)    
Net cash used in financing activities (5,771)   (6,188)    
Net decrease in cash and cash equivalents (18,429)   (12,126)    
Effect of foreign exchange rates on cash (115)   919    
Cash and cash equivalents, beginning of period 31,675   53,020    
Cash and cash equivalents, end of period 13,131   41,813    
       

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, (iv) free cash flow 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 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 performance measures in accordance with IFRS.

 

  • EBITDA refers to earnings before interest, taxes, depreciation, and administration and is calculated by adding depreciation expense to the Company’s gross profit.

 

(Expressed in thousands) Q3-2023 Q3-2022
  $ $
Gross loss (2,024) (3,556)
Add:    
Depreciation and amortization 5,192 5,125
EBITDA 3,168 1,569
  • 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) Q3-2023 Q3-2022
  $ $
Net cash used in operating activities (7,455) (4,124)
Add:    
Changes in non-cash working capital 10,072 6,741
Operating cash flow before non-cash working capital 2,617 2,617
     

(iii) Free cash flow to equity 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 the following:

  1. 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 refers to FCFE plus repayments of borrowings and lease repayments.

 

     
(Expressed in thousands) Q3-2023 Q3-2022
  $ $
Operating cash flow before changes in non-cash working capital 2,617 2,617
Deduct:    
Cash used to purchase plant and equipment (5,203) (1,814)
Lease repayments (218)
Free cash flow to equity (2,586) 585
Add:    
Lease repayments 218
Free cash flow (2,586) 803
     
  • 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 by the number of pounds of copper produced.

 

(Expressed in thousands)   Q3-2023   Q3-2022
    $   $
Tolling and production costs   32,353   34,414
Add (deduct):        
Smelting and refining charges   4,473   5,926
Transportation costs   295   410
Inventory adjustments   684   (614)
By-product credits   (4,580)   (3,492)
Depreciation and amortization   (5,192)   (5,125)
DET royalties – molybdenum   (863)   (691)
Cash cost   27,170   30,828
Copper tolled (M lbs)   11.12   16.00
Cash cost ($/lb)   2.44   1.93
         

 

Dividend yield

 

The disclosed annual yield of 9.4% is based on four quarterly dividends of Cdn$0.03 per share each, divided over Amerigo’s September 29, 2023, closing share price of Cdn$1.27.

 

Dividend dates

 

A dividend of Cdn$0.03 per share will be paid on December 20, 2023, to shareholders of record as of November 30, 2023. Accordingly, the ex-dividend date will be November 29, 2023. Shareholders purchasing Amerigo shares on the ex-dividend date or after will not receive this dividend, as it will be paid to selling shareholders. Shareholders purchasing Amerigo shares before the ex-dividend date will receive the dividend.

 

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 of the third month following the delivery of copper concentrates produced under the DET tolling agreement (“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.

 

Q2-2023 copper deliveries were marked-to-market on June 30, 2023 at $3.80/lb and were settled in Q3-2023 as follows:

  • April 2023 sales settled at the July 2023 LME average price of $3.83/lb
  • May 2023 sales settled at the August 2023 LME average price of $3.79/lb
  • June 2023 sales settled at the September 2023 LME average price of $3.75/lb

 

Q3-2023 copper deliveries were marked to market on September 30, 2023 at $3.75/lb and will be settled at the LME average prices for October ($3.60/lb), November and December 2023.

 

Posted November 1, 2023

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